The world is upside down. Is bitcoin stable now? Or is everything else extremely volatile all of a sudden? As the planet descends into chaos, bitcoin remains in a weird limbo that’s uncharacteristic of the asset and doesn’t seem to end. That’s both what it feels like and what the stats say. In the latest ARK Invest’s The Bitcoin Monthly report, they put it like this, “bitcoin finds itself in a tug of war between oversold on-chain conditions and a chaotic macro environment.”
What about the numbers, though? The stats support the thesis, “for the third month in a row, bitcoin continues to trade between support at its investor cost basis ($18,814) and resistance at its 200- week moving average ($23,460).” Three months in that range seems like too much. Something’s got to give. However, that’s what everyone’s been thinking for ages and we’re still here.
The Dollar Milkshake Theory
Bitcoin has been less-volatile than usual, sure, but the main factor here is that the whole world is falling to pieces. Every company is in the red, especially the techy ones, and all of the world’s currencies except the dollar fell off a cliff. Are we seeing “the dollar milkshake theory” playing out in front of our own eyes? It sure feels that way. Global central banks have been printing bills like there’s no tomorrow, and that extra liquidity is there for the stronger currency to take.
According to professional investor Darren Winter, the “dollar milkshake theory views central bank liquidity as the milkshake and when Fed’s policy transitions from easing to tightening they are exchanging a metaphoric syringe for a big straw sucking liquidity from global markets.” If that’s what we’re seeing, what happens next? Back to The Bitcoin Monthly, ARK says:
“As macro uncertainty and USD strength have increased, foreign currency pairs have been impacted negatively while bitcoin has been relatively stable. Bitcoin’s 30-day realized volatility is nearly equivalent to that of the GBP and EUR for the first time since October 2016”
BTC price chart for 11/07/2022 on Bitstamp | Source: BTC/USD on TradingView.com
Bitcoin Vs. Other Assets In October
The macro-environment has been so bad lately, that there’s the perception that bitcoin has been doing better than stocks. The facts are that in October, for the first time since 2020, “bitcoin’s 30-day volatility is on par with the Nasdaq’s and the S&P 500’s.” And, we know past performance doesn’t guarantee future results, but “the last time bitcoin’s volatility declined and equaled the rising volatility of equitiy indices was in late 2018 and early 2019, preceding bullish moves in the BTC price.”
However, let’s not kid ourselves, bitcoin has not been doing good. The thing is, not much is prospering out there. Especially in the tech sector. “The price drawdowns from alltime high in Meta (-75.87%) and Netflix (-76.38) have exceeded that of bitcoin’s (-74.46%). To a lesser extent, Amazon also suggests a correction proportional to that of BTC’s “usual” volatility (-48.05%).”
According to The Bitcoin Monthly, the situation “suggests the severity of the macroeconomic environment and bitcoin’s resilience against it.”
The only constant is change, however. Bitcoin’s stability suggests a violent breakout, either up or down. The entire world can’t remain the red forever, something or someone has got to rise above the crowd and show everyone how it’s done. We’ve been waiting for a resolution for what feels like ages, and we’ll probably have to wait some more. There will be a movement, though. When we least expect it, probably.