Correlation 1 - where art thou?
Arthur, my sometimes ambivalent and other times pompous guru wrote recently about the correlation 1 moment that he feels is probably coming. He has hinted towards it a number of times previously however for once I wonder if he is waiting for an Armageddon that may not arrive; or if it does it will leave most participants breathless and unable to blink in time. Psychologically speaking, it seems very similar to the test that Mark Douglas refers to in his book, Trading in the zone, where someone was giving out free money with no strings attached on a street and 99% of passers-by thought of this as a potential scam
Arthur Hayes
To judge the likelihood of such a scenario still occurring I thought to look back over the history of bitcoin, number of times it breached the 200-2day moving average (yes it's a 2day's moving average as opposed to 1day's + just eye-balled metrics instead of being super scientific on my part). Moreover, compared it to SPY's & NDX's similar breaches (again ignored anything that lasted a day or 2).
| Breach from | Till | Length of time (months) | Percentage loss between breach & low within the breach | Co-incident with breach in SPY | Co-incident with breach in NDX |
|---|---|---|---|---|---|
| Oct 2011 | Dec 2011 | 3 | 50 | Y - partially; near the beginning of BTC's breach | |
| Aug 2014 | Oct 2015 | 15 | 70 | Y - partially; new the end of BTC's breach | |
| Jun 2018 | Apr 2019 | 11 | 70 | Y - partially; new the end of BTC's breach | |
| Nov 2019 | Jan 2020 | 3 | 10 | Y | |
| Mar 2020 | Apr 2020 | 2 | 50 | Y | Y |
| Jan 2022 | - | 3 so far | 20 so far | Y - late-Feb till mid-Mar |
Looking at above and knowing the past decade of bitcoin it seems to me the only true correlation 1 moment was March 2020 when all assets seemingly trended to zero, Additionally, March 2020 felt (I was awake & monitoring a number of crypto spot and futures exchanges including BitMex) like a gravitational singularity (I presume would feel), where the sheer speed & collapse of prices was enough to question the future of the whole crypto space & my sanity! I feel this singularity has had a paradigm shift - due to which we didn't get any blow-off top & probably won't get an extreme capitulation event.
Now fast forward to today; BTC has just poked its head over the breach for the 4th time since Jan 2022; and yet I am in two minds over the future direction. I feel some of following are needed if we are truly to see $20k BTC (and $1.2k ETH)
- SPY breaching
- new BTC narratives begin to face blockers - e.g. Luna having an hiccup in its plans to put $3 to $10 billion BTC as a reserve/collateral asset behind UST; its algorithmic stable coin
Vishal Chawla
- bad news to actually depress prices - e.g. El Salvador's bitcoin bond delay failed to make a dent
Nelson Renteria/cloudfront-us-east-2.images.arcpublishing.com/reuters/OABKIIR7I5P7XMGT4Z3TGNQILM.jpg)
- Biden's executive order leads to policy decisions that enforce draconian measures. However, quite a few long term government advisors seem to be putting forward views that seem to be positive for bitcoin (https://uploads-ssl.webflow.com/627aa615676bdd1d47ec97d4/629ed6fc7948cb7951197365_Bitcoin and U.S. National Security.pdf). Even Yellen seemed a bit positive recently.
Jeff Benson
- Russia to utilise bitcoin as payment for its oil/gas leading to greater scrutiny / blockers on crypto-sphere. Canada is going that way already after the trucker strike...
- Some draconian crypto AML FATF travel-rule implementation. EU Parliament is about to (on Thursday) vote on crypto AML regulation where they propose to revise Transfer of Funds Regulation (TFR). Herein, they are not setting a minimum floor that must be breached prior to any PI info sharing - seems to be any & all crypto transfer must require additional PI data sharing; essentially a divergence when compared to fiat. Personally; I have had to go through an implementation of such a process with an exchange. Literally had to send dust amount to an exchange's wallet to prove ownership. They just deposited it under my name and I could transfer it back out if I so wished.
When feeling the FOMO (fear of missing out) I look at the transaction fees chart of Bitcoin; we are still higher than pre-COVID crash and Jun 2018 - Apr 2019 period. Lastly, Bitfinex whales have now stacked visible orders on both bid & offer...wondering in this cat & mouse game who will pull their orders first?
musings:
Sberbank seems to be building out a smart contract...wondering how many blackhat hackers will officially come out to target it?
Craig Wright lawsuit against Bitcoin developers got rejected by UK judge. Craig had wished to make the developers liable as fiduciaries and force Bitcoin to be rolled back so he can claim his "Satoshi" coins.
ETH merge is still on - yet there are differences & noise regarding the complexity of its implementation. I will be biting my nails around late May - prior to that a capitulation to $1.2k / ETH would be a dream scenario for mass accumulation
Kraken Bank (Wyoming subsidiary of Kraken crypto exchange has secured an American Bankers Association routing number - now fun starts to get the Fed master account
Dinosaur coins (like ZRX) that I forgot about have been randomly having price spikes this weekend - is that the omen for the coming of correlation 1 moment....
