First Mover: Bitcoin Bounces Back Above $47K Despite Bearish Chart Pattern

March 1, 2021

Everything you need to make sense of the crypto markets and beyond

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By the CoinDesk Markets Team

Edited by Lawrence Lewitinn

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Bitcoin (BTC)

+5.68% $47,828

Ether (ETH)

+11.19% $1,523

(Price data as of Mar. 1 @11:51 UTC)

Good morning. Here's what we're writing about:

Bitcoin's Uncorrelated Returns Still Makes It Attractive to Portfolio Managers

Check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Lawrence Lewitinn and Emily Parker, at 9 a.m. U.S. Eastern time. Today the show will feature guests:

Raghu Yarlagadda, co-founder and CEO of FalconX

Simon Chantry, co-founder and CBDO of Bitt

MARKET MOVES by SEBASTIAN SINCLAIR & OMKAR GODBOLE

Bitcoin Bounces Back Above $47K Despite Bearish Chart Pattern

Bitcoin regained some lost ground early on Monday, so far ignoring early indications of a bearish reversal on the weekly chart.

The cryptocurrency climbed to a high of $47,162 during the European morning, having dropped to $43,119 on Sunday – its lowest since Feb. 8. Bitcoin is up 5% over 24 hours near $47,230 at press time.

The rise comes despite signs of bearish trend reversal on a longer-duration technical chart. The cryptocurrency fell 21% in the seven days to Feb. 28, despite multiple favorable market news events, forming a bearish engulfing pattern on the weekly chart.

Bitcoin weekly chart, with bearish engulfing pattern highlighted (Chart source: Bitstamp)

The candlestick pattern indicates a reversal to bearish conditions, as sellers succeeded in pushing prices below the previous week's "opening" price (on Monday at 00:00 UTC) .

A similar bearish engulfing pattern marked an end of the previous bull market in December 2017. The cryptocurrency then entered a 12-month long bear market which bottomed following an 83% drop to lows near $3,100.

Blockchain data also shows signs of a cooldown in demand. The total number of bitcoin addresses with less than 0.01 BTC has also fallen slightly, according to data from Glassnode, indicating retail investment has begun to ease. The same can be said for wallet addresses containing 1 BTC all the way up to 1,000 BTC, where interest among institutional buyers appears to be capped.

That said, the engulfing candle pattern is just one signal amongst many market indicators and historical data shows the cryptocurrency saw multiple corrections of 30–39% during the 2017 bull market.

"BTC has found temporary footing," Jehan Chu, managing partner at cryptocurrency investment firm Kenetic Capital, told CoinDesk via WhatsApp. "Institutions and long-term investors are forming a solid backdrop and speculators smell a buying opportunity."

Traders should expect continuing volatility, he added, as buyers "prove out a floor" above the $40,000 mark before a return to $50,000 as buying resumes.

-- Sebastian Sinclair & Omkar Godbole

Read original story here:https://www.coindesk.com/bitcoin-bounces-47k-bearish-signal

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LAWRENCE LEWITINN

Bitcoin's Uncorrelated Returns Still Makes It Attractive to Portfolio Managers

For anyone who started buying crypto a week ago, the past few days have been awful. Bitcoin closed February down 20% from its all-time highs hit on the 21st of the month. However, for anyone else who bought any time before Feb. 8, it’s been an investment that has paid off handsomely.

While bitcoin year-to-date returns may have come off since Feb. 21, they’re still significantly higher than U.S. equities. And they’re positive for the year, unlike safe havens gold and bonds, which have been crushed with rising interest rates.

Returns for bitcion, S&P 500, gold, and U.S. Treasury bonds, Jan. 1 - Feb. 28, 2021 (Data sources: London Bullion Market, St. Louis Fed, Yahoo Finance, CoinDesk Research)

That’s not to say bitcoin comes without risk. Its realized volatility — that is, the standard deviation of returns — is astronomical relative to stocks or even precious metals. That figure over the past 30 days is close to 100% on an annualized basis. Granted, it’s four times higher than it was over the summer but it’s been even higher, hitting as high as 200% just 11 months ago.

Bitcoin 30-day volatility, annualized (Source: Skew)

Yet despite the past week’s tumble, there’s still an argument that can be made that the most risk adverse investor should allocate a even small amount to the likes of bitcoin.

JPMorgan strategists Joyce Chang and Amy Ho wrote, “In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio,” reported Bloomberg Wednesday.

From a portfolio management point of view, the reason is correlation. The correlation coefficients for bitcoin and other major assets like the S&P 500, gold and bonds are converging on zero. They were elevated for the S&P 500 and gold because of the massive sell-off a year ago in all “risk-on” assets while significantly negative compared to U.S. Treasury bonds (considered a “risk-off” asset).

Bitcoin and macro assets 90-day correlation coefficients, Jan. 2020 to Feb 2021 (Data sources: St. Louis Fed, Yahoo Finance)

Sure, for many, bitcoin’s volatility offsets any possible allure its spectacular recent gains may have. Nonetheless, for a portfolio to be diversified, its assets must be as uncorrelated as possible. That feature may be enough to continue to attract portfolio managers in the weeks and months to come.

--Lawrence Lewitinn

BIGGEST MOVERS

These are the biggest movers in the CoinDesk 20 over the past 24 hours:

Gainers:

Ether (ETH): +11.19%

Chainlink (LINK): +8.62%

Losers:

The CoinDesk 20 filters from the larger universe of thousands of cryptocurrencies and digital assets to define a core group of 20. These assets constitute roughly 99% of the market by volume at eight of the largest and most trustworthy exchanges.

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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