Bitcoin has given a strong bounceback on Sunday preventing a negative closing for the ninth-consecutive week in a row. Bitcoin decoupling from US equities still remains a concern.
On Sunday, May 29, Bitcoin registered a surprising bounceback gaining 6% and moving closer to $31,000. With this move, Bitcoin dodged the possibility of the ninth straight week of negative closing.
This reversing of momentum and trajectory is quite a big relief for investors. As of press time, BTC is trading 5.77% up at a price of $30,655 with a market cap of $585 billion.
Last week, BTC continued to fall despite the US stocks recovering from the early May market turmoil. This was one of the major decoupling events for Bitcoin from the Nasdaq 100, with whom BTC has shared a strong correlation.
For a large majority of last week, BTC was trading in the negative territory whereas the Nasdaq 100 ended over 6% positive. In their newsletter to investors, trading firm QCP Capital wrote:
“Most concerning has been the divergence between Equities and Crypto. S&P and NASDAQ have traded about 10% higher since 20 May lows while both BTC and ETH have traded lower in the same period. This is not the direction of decoupling we were hoping for!”
There are some positive triggers for BTC. For e.g. the Dollar Index has been falling. Explaining the correlation, crypto analyst Lark Davis writes that “historically this is good for Bitcoin in the opposite way that Dollar rallies are bad for BTC price”. He further adds that if Bitcoin manages to close above $31,000, the next immediate target could be $38,000.
Can Bitcoin Go Down Again?
Although the relief rally for Bitcoin is a welcome move, the dark clouds are still hovering around. Industry players are seeing Bitcoin’s decoupling from the stock market as a warning sign. Antoni Trenchev, co-founder and managing partner of crypto lender Nexo told Bloomberg:
“This is the type of de-correlation nobody wanted. Bitcoin has yet to test its sub-$26,000 May 12 lows. One senses it’s only a matter of time, given Bitcoin’s failure to mirror the Nasdaq’s gains in the past week.”
That said if Bitcoin fails again to hold above $30,200 levels it can once again crash to $28,000. If it fails to hold $28,000 then there’s a greater possibility of it slipping to $25,000 and next to $22,000. Hopefully, Bitcoin catches up with the US equity market ahead this week.