A nervous month - Global crypto events that matter
September has been a tough month for crypto markets and as we wrap up, the negative sentiment still rules in both bitcoin and altcoin spaces even after the late September selloff. OKEx’s BTCUSD Index slashed 17.02% in September, it was the third consecutive monthly retreat, and that made BTC market dominance declined from 71.21% in the early of the month to 67.5% levels in the month-end. On the altcoin side, we’ve seen a short-lived altcoin rally before the bitcoin selloff. However, as the prices of the leading cryptocurrency slid, altcoin followed suit. With that, the total crypto market cap dropped to around 217 billion USD by the end of the month, and the Ex-BTC total market cap went below the 70 billion USD mark as we enter October.
The recent fuzzy sentiment in the global financial markets has seems to somewhat become a setback for crypto. On one hand, we have the risk-off narrative led by headlines and events like Trump impeachment inquiry and the Brexit saga, which set DXY to a new 52-week high, and kept gold remained at around 1500 USD levels. On the other hand, the additional easing from central banks was partly behind the equity indexes rally, with the SPX topped its all-time high in September while the STOXX Europe 600 also has been hovering near its 52-week high. As we discussed in our earlier publication “A Tale of Two Assets”, this trendless situation didn’t work well on bitcoin and crypto in a broader sense.
Looking ahead, macro event risks such as the outcome of the US-China trade talks (possibly first or the second week of October), and the US Fed interest rate decision (31/10) are still something to watch. Investors also don’t want to miss the latest development of Ethereum’s Istanbul upgrade, and how the SEC handles the bitcoin ETF proposals.
Figure 1: Metrics of Major Cryptocurrencies (Until September End)
Major altcoins followed the bitcoin selloff in September and many of them have suffered double-digit monthly losses. BSV and BCH gave up 36% and 22% of market value respectively, while ALGO dropped more than 40%.
It’s worth noting that regulators in South Korea amended the country’s crypto transaction rules, demanding businesses to identify the two parties sending funds to each other if a transaction is worth more than around 1000 USD. Therefore trading of XMR, DASH, ZEC, and ZEN was affected and will be terminated in some of the exchanges that operate in South Korea. The amendments will be effective on October 10th. It’s not clear how the regulatory changes will impact the prices of those altcoins.
Figure 2: Altcoins Performance in September
The prices of bitcoin have dropped about 17% in September, it was the third consecutive month of decline and that makes bitcoin plummeted 25.11% in 3Q19, however, with the significant performances in 1H, bitcoin still manages to have more than 120% of YTD return.The selloff in late September also pushed BTC’s 1-month realized volatility to above 50% level (figure 4A), however, the volatility level is expected to be lower as bitcoin started to trade sideways again after the selloff.
The selloff in late September also pushed BTC’s 1-month realized volatility to above 50% level (figure 4A), however, the volatility level is expected to be lower as bitcoin started to trade sideways again after the selloff.
It’s worth noting that the 1-month realized correlation between bitcoin and gold has dropped from almost 40% in mid-Sept. to as low as -3% after the selloff (figure 5).
Figure 3: OKEx’s BTCUSD Index Monthly Performance
Despite the drop in the near-term BTC-Gold correlation, data shows that the longer-term of that correlation remained comparatively high. Figure 6 shows that BTC-gold 90-day correlation remained at above 0.1, while the VIX has been inching closer to 0. The negative correlation between BTC and SPX is another highlight, as it almost reached -0.2 in September.
Figure 6: Bitcoin’s 90-Day Realized Correlations with DXY/Gold/SPX/VIX
Staying with the 90-day time frame, it's interesting to see the positive correlation between BTC and XMR has gained higher in September and has become one of the most BTC-related altcoins, this came after BTC-ETH correlation dropped from above 0.8 to lower 0.7 area. Besides, BTC-LTC correlation also gained tractions and has returned to July’s level.
Figure 7: Bitcoin’s Correlations with Major Altcoins
The September selloff-related negative sentiment seems carried into early October trading, while bitcoin stabilized at around 8000 USD levels. OKEx Technicals maintains their views on bitcoin, believing that BTC’s real support would be in the 7500 to 8000 area, which is the two major levels back in May and June, they also believe that bitcoin may need further consolidations at current levels before starting a new trend.
The daily OKEx’s BTC Long/Short Ratio could support that argument. The Ratio hovered at the 0.93 area which is the all-time low, it indicates that traders with long positions could have higher potential profits. If the Ratio continues to go lower, we could see a bigger rebound of the prices of bitcoin in the near term.
Figure 8: OKEx’s BTC Long/Short Daily Ratio
Figure 9: BTCUSDT Daily Chart
Source: OKEx; Tradingview
Many of the altcoins have been underperforming bitcoin after the September selloff and yet to recover, but Chainlink is one of the exceptions. LINKUSDT has rebounded to the pre-selloff levels and traded above the 10, 20 and 50-SMA, while BTCUSDT, LTCUSDT, and other major pairs still traded way below major moving averages. LINKUSDT seems also formed a double bottom pattern, indicating a change in trend from bearish to bullish. If the momentum continues, the pair could be on the way to retest the 50% Fibonacci retracement at around 2.12.
Figure 10: LINKUSDT Daily Chart
Source: OKEx; Tradingview