Earlier today, Pfizer
Despite the Pfizer-led reprieve for bitcoin, its price movements since the “halving” have largely been disappointing, especially amidst the Fed’s extraordinary actions, which have benefited store of value assets like gold, historically.
The main question floating around the crypto investment world is, “Why isn’t price rising?” Three possible explanations have floated to the top.
In 2019, a group called PlusToken, systemically scammed numerous investors throughout China to the total of more than 200,000 bitcoin, or ~ $1.84 billion, at the time of writing. Since then, the scammers have meticulously liquidated their ill-gotten gains on several exchanges. Liquidations have created a consistent and strong selling pressure to bitcoin according to notable fund manager, Travis Kling.
However, as seen by today’s price action, the correlation between the S&P 500 and bitcoin has been rising steadily as Covid-19 cases spike in several states. The popular bitcoin analyst, PlanB, has stated recently that equity correlation is driving bitcoin, not scammers. He further notes that “I think it is a silly narrative. In the old days if traditional markets moved without news or cause, it was always “the hedge funds.”
Finally, others surmise bitcoin is a free market asset and naturally oscillates, which make correlations unstable and temporary over time. Popular crypto trader, Scott Melker, notes “I do think that bitcoin has benefited from a bull market (equities) – that’s just logical…but that does not mean that those assets have been correlated.” He further states that if you have to make a comparison, “I think a naked eye on the DXY (US Dollar Index) vs BTC chart is more compelling…clear inverse correlation.”
While each faction believes their conclusions are the leading driver of bitcoin’s tepid movement, no one knows for certain given the unverified price effect of scammer sales, and inconsistent correlations between both equities and US dollar index to bitcoin.
Pragmatism would suggest that some combination of the aforementioned elements are driving bitcoin. However, only after time has passed and looking in hindsight, will readers know the dominant factor.
Disclosure: The author owns bitcoin and ethereum.