Source: Cointelegraph Original: "{title}"
Bitcoin (BTC) fell below $75,000 on Tuesday (April 6) under pressure from traditional markets, as S&P 500 futures hit their lowest level since January 2024. The initial panic also led WTI crude oil futures to drop below $60 for the first time in four years. However, the market later warmed up, allowing Bitcoin to return to the $78,000 level.
While some analysts believe that Bitcoin has entered a bear market after a 30% price correction from its cycle peak, historical data provides numerous examples of stronger recoveries. Notably, the high correlation between Bitcoin and traditional markets is often short-lived. Several indicators suggest that traders are simply waiting for better entry opportunities.
40-day correlation: S&P 500 futures compared to Bitcoin/USD. Source: TradingView / Cointelegraph
Bitcoin's recent performance is closely tied to the S&P 500, but this correlation has significantly fluctuated over time. For instance, in June 2024, the correlation turned negative as the two asset classes moved in opposite directions over the past 50 days. Additionally, while the correlation metric exceeded the 60% threshold for 272 days over two years—about 38% of that period—this data is statistically uncertain.
Bitcoin's recent drop to $74,440 reflects the high uncertainty in traditional markets. Although an unusually high correlation between Bitcoin and traditional assets has occurred in the past, it rarely lasts long. Moreover, most major tech stocks are currently trading at least 30% below their historical highs.
Even with a market capitalization of $1.5 trillion, Bitcoin remains one of the top ten tradable assets globally. While gold is often viewed as the only reliable "store of value," this perspective overlooks its volatility. For example, gold fell to $1,615 in September 2022 and took three years to recover to its previous historical high of $2,075.
While gold has a market capitalization of $21 trillion—14 times that of Bitcoin—the gap in assets managed by spot exchange-traded funds (ETFs) is much smaller: $330 billion for gold and $92 billion for Bitcoin. Additionally, Bitcoin listing tools like the Grayscale Bitcoin Trust (GBTC) have been listed on exchanges since 2015, giving gold a 12-year head start in market presence.
From a derivatives perspective, Bitcoin perpetual futures (inverse swaps) are in good shape, with funding rates close to zero. This indicates a balance in leverage demand between bulls (buyers) and bears (sellers). This contrasts sharply with the period from March 24 to March 26, when funding rates turned negative, reaching 0.9% per month, reflecting stronger demand for bearish positions.
Bitcoin perpetual futures 8-hour funding rate. Source: Laevitas.ch
Moreover, the $412 million liquidation of leveraged long positions between April 6 and April 7 was relatively mild. In contrast, when Bitcoin's price dropped 12.6% between February 25 and February 26, the total liquidation of leveraged bullish positions amounted to $948 million. This suggests that traders were better prepared this time or relied less on leverage.
Finally, the demand for stablecoins in China provides further insight into market sentiment. Typically, strong retail cryptocurrency demand drives stablecoins to trade at a premium of 2% or more over the official USD exchange rate. Conversely, a premium of less than 0.5% usually indicates fear, as traders seek to exit the crypto market.
Related: Michael Saylor's strategy halts Bitcoin purchases despite falling below $87,000
USDT Tether (USDT/CNY) compared to USD/CNY. Source: OKX
Even with Bitcoin's price falling below $75,000, the premium for USD Tether (USDT) remained at 1% on April 7. This suggests that investors may be shifting their positions to stablecoins, possibly waiting for confirmation that the U.S. stock market has bottomed out before returning to cryptocurrency investments.
Historically, Bitcoin's correlation with the S&P 500 has been low. Additionally, the near-zero BTC futures funding rate, relatively mild futures liquidations totaling millions, and the 1% stablecoin premium in China indicate that Bitcoin's price may have found a bottom at $75,000.
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