Decentral Block Post

The correlation between Bitcoin (BTC) and stock markets has been unusually high since mid-March, meaning the two asset classes have presented near-identical directional movement. This data might explain why the 10% rally above $21,000 is being dismissed by most traders, especially considering S&P 500 futures gained 4% in two days. However, Bitcoin trading activity and the derivatives market strongly support the recent gains.

Curiously, the current Bitcoin rally happened a day after the White House Office of Science and Technology Policy released a report investigating the energy usage associated with digital assets. The study recommended enforcing energy reliability and efficiency standards. It also suggested federal agencies provide technical assistance and initiate a collaborative process with the industry.

Notice how the peaks and valleys on both charts tend to coincide, but the correlation changes as investors’ perceptions and risk assessments vary over time. For example, between May 2021 and July 2021, the correlation was inverted most of the period. Overall, the stock market posted steady gains while the crypto markets collapsed.

More importantly, the chart above shows a huge gap being opened between Bitcoin and the stock market as stocks rallied from mid-July to mid-August. A comparison using the same scale would be better, but that does not work due to the difference in volatility. Still, it is reasonable to conclude that historically these gaps tend to close.

The S&P 500 futures declined 18% in 2022 until Sept. 6, while Bitcoin dropped 60.5% during the same period. So it makes sense to assume that if investors’ appetite for risk assets returns, assets with higher volatility will outperform during a rally.

Federal Reserve Chairman Jerome Powell said in a question and answer session hosted by the Cato Institute on Sept. 8 that the central bank will continue to hike rates until inflation is under control. However, these comments did not rattle the markets as much as most would have anticipated, indicating that traders might have already factored in a 75 basis point rate hike in the Fed’s next meeting on Sept. 20–21.

Bitcoin has been strongly correlated with the S&P 500 and inversely correlated with the United States dollar index (DXY) for the past several weeks. With the DXY cooling off after hitting a two-decade high, risky assets have been attempting a recovery.

U.S. equities markets are attempting to snap a three-week losing streak while Bitcoin (BTC) has soared above the psychological level at $21,000.

Does the rally in the equities and crypto markets indicate that the risk-on sentiment is back? Let’s analyze five asset classes to review their trends and determine where they might go in the next few days.

BTC/USDT

Bitcoin rebounded off the strong support at $18,626 on Sept. 7 and broke back above the breakdown level of $19,520 on Sept. 9. This may have triggered short-covering by the aggressive bears, which propelled the price above the 20-day exponential moving average (EMA) ($20,434).

The listing of ETHPOW (ETHW) across multiple crypto exchanges has been followed by a huge drop in price despite some initial success. 

ETHPOW drops 80% 

On the daily chart, ETHW's price dropped by more than 80% to $25 on Sept. 10, over a month after its market debut.

For starters, ETHPOW only exists as a futures ticker, for now, conceived in anticipation that an upcoming network update on Ethereum could result in a chain split.

Ethereum will undergo a major protocol change called the Merge by mid-September, switching its existing consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS).

Therefore, Ethereum will obsolete its army of miners, replacing them with "validators," which are nodes that would perform the same tasks by merely staking a certain amount of tokens with the network.

The listing of ETHPOW (ETHW) across multiple crypto exchanges has been followed by a huge drop in price despite some initial success. 

ETHPOW drops 80% 

On the daily chart, ETHW's price dropped by more than 80% to $25 on Sept. 10, over a month after its market debut.

For starters, ETHPOW only exists as a futures ticker, for now, conceived in anticipation that an upcoming network update on Ethereum could result in a chain split.

Ethereum will undergo a major protocol change called the Merge by mid-September, switching its existing consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS).

Therefore, Ethereum will obsolete its army of miners, replacing them with "validators," which are nodes that would perform the same tasks by merely staking a certain amount of tokens with the network.

Bitcoin (BTC) bounced past $20,000 on Sep. 9 as a much-anticipated “short squeeze” took hold.

Trader: BTC could go to $25,000

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD adding as much as $2,700 (8.7%) in hours on the day, reaching its highest since Aug. 26.

After weeks of ranging punctuated with successive moves to the downside, Bitcoin thus finally gave bulls what they wanted.

For popular trading Twitter account Il Capo of Crypto, the upside still had potential to continue at the time of writing, with BTC price action eyeing $21,000.

“Bears very weak here, imo it keeps going up soon,” he forecast.