BTC Correlates with Equities as Altcoins Show Resilience, Reports Bitfinex

Bitcoin
(BTC)
continues
to
show
a
strong
correlation
with
traditional
equity
markets,
particularly
the
S&P
500,
while
altcoins
are
demonstrating
notable
resilience,
according
to
Bitfinex
Alpha’s
latest
report.

Bitcoin’s
Downward
Trend

Last
week,
Bitcoin
faced
a
significant
decline,
dropping
by
10.7%
in
the
first
week
of
September.
This
continued
the
downtrend
observed
since
late
August,
pushing
the
price
below
the
critical
level
of
$56,711,
a
threshold
that
had
previously
triggered
swift
recoveries.
The
sell-off
led
to
a
reduction
in
leveraged
positions,
indicating
a
market
potentially
nearing
a
local
bottom.

However,
the
report
suggests
that
the
short-term
trajectory
of
Bitcoin
remains
heavily
influenced
by
the
performance
of
US
equity
markets.
The
S&P
500
experienced
its
worst
weekly
performance
since
March
2023,
emphasizing
the
persistent
correlation
between





Bitcoin
prices
and
traditional
financial
markets.
Notably,
there
have
been
$706.1
million
in
net
outflows
from
Bitcoin
ETFs
since
August
27th,
indicating
that
traditional
finance
investors
are
de-risking
from
cryptocurrencies.

Altcoins
Outperform

In
contrast,
altcoin
markets
have
shown
resilience
amid
Bitcoin’s
decline.
Bitcoin
dominance,
which
measures
the
market
capitalization
of
BTC
against
the
rest
of
the
crypto
market,
decreased
by
1.3%.
Conversely,
the
market
cap
of
all
other
crypto
assets,
excluding
the
top
10,
increased
by
4.4%.
This
shift
suggests
that
investors
are
exploring
value
in
altcoins,
diverging
from
the
typical
pattern
of
flocking
to
Bitcoin
during
downturns.

Despite
this
resilience,
altcoin
open
interest
has
dropped
by
55%
from
its
all-time
high,
indicating
speculative
apathy
and
potential
exhaustion
among
sellers.
The
ETH/BTC
ratio,
a
proxy
for
the
altcoin
market,
remains
under
its
365-day
Simple
Moving
Average,
reflecting
the
broader
underperformance
of
Ethereum
since
the
Merge.

However,
if
Bitcoin
dominance
has
indeed
reached
a
local
top,
the
coming
months
could
see
a
period
of
altcoin
outperformance,
potentially
setting
the
stage
for
a
bullish
Q4
should
macroeconomic
pressures
ease.

Macroeconomic
Influences

The
primary
catalyst
for
last
week’s
sell-off
was
the
US
labor
market
report
for
August,
which
showed
only
modest
growth.
This
report
offers
the
Federal
Reserve
some
reassurance
as
they
prepare
for
a
potential
shift
towards
lowering
interest
rates.
Employment
figures
rose
less
than
anticipated,
but
the
unemployment
rate
dipped
to
4.2%
from
4.3%
in
July.

In
the
manufacturing
sector,
evidence
of
continued
contraction
for
the
fifth
consecutive
month
emerged,
driven
by
weak
demand.
This
supports
the
case
for
a
lowering
of
rates.
Companies
are
cutting
back
on
production
to
protect
profit
margins,
mirroring
broader
slowdowns
in
economic
activity.

The
construction
sector
is
also
showing
signs
of
strain.
The
US
Commerce
Department’s
Census
Bureau
reported
a
0.3%
decline
in
construction
spending
in
July,
following
no
change
in
June.
This
decline
reflects
the
broader
slowdown
in
the
housing
market
as
reduced
affordability
and
the
fading
of
the
pandemic-era
housing
boom
impact
sales.

Additional
Developments

In
other
news,
Japan’s
three
megabanks—MUFG,
SMBC,
and
Mizuho—are
launching
“Project
Pax,”
a
pilot
program
using
blockchain-based
stablecoins
to
streamline
cross-border
settlements,
aiming
for
commercial
rollout
by
2025.
The
project
will
integrate
SWIFT’s
API
framework
for
compliance
and
efficiency.

Meanwhile,
the
Federal
Reserve
has
issued
a
cease-and-desist
order
on
United
Texas
Bank
due
to
shortcomings
in
its
risk
management
and
anti-money
laundering
practices
regarding
its
crypto
clients.
The
bank
has
been
ordered
to
improve
its
oversight
and
customer
due
diligence
procedures.

For
more
detailed
insights,
the
full
report
is
available
on

Bitfinex.

Image
source:
Shutterstock