After a dismal third quarter to say the least, we are finally entitled to some action in the markets. Bitcoin price like the price of most cryptocurrencies has been on the rise for 48 hours. For bitcoin, this means a price that has not been visited in six weeks. This is also a break of the resistance around $20,500, at least if the price can close above this area later today.
As bitcoin is looking for a breakout above $21,000 at the time of writing, the cryptocurrency market sell-off over the past day has crossed $1 billion. October has always been a positive month for major cryptocurrencies, posting tenfold monthly gains over the past thirteen years. Paying the price of Ether is even more impressive, 2e The cryptocurrency’s market cap saw a peak of 14% over a 24-hour period. We told you to keep a close eye on the price of ETH in our recent posts. We took advantage of the opportunity and took large positions at the beginning of the rally. About half of the fund’s capital is currently exposed to ether.
Last-day liquidations, mainly the forced closing of short positions in major cryptocurrencies, reached record levels dating back to July.
However, the correlation between bitcoin and major US stock markets continues to garner attention. Moreover, this price hike was parallel to the rise in these markets. To that effect, it is encouraging to see that the 20-day realized volatility of bitcoin, a metric that measures daily changes in the price of bitcoin, has fallen below the level of the Nasdaq and S&P 500 for the first time in two years. .
The current correlation is around 0.5 with the S&P. Over the past few weeks, bitcoin now seems to (finally) act as a kind of hedge against macroeconomic uncertainty. The difference in market activity for the two asset classes indicates that cryptocurrencies are more resilient to recent macroeconomic events that cause volatility. In short, the indicators show a recent breakup. The real question is whether the latter will withstand upcoming macroeconomic events, in particular the increases in US interest rates on November 2nd.
October saw a surge in the bitcoin hash rate, pushing the metric to a new all-time high of 263 xahash per second. In parallel, this means that the network’s difficulty has been increasing since July 2022. Indeed, the competition among bitcoin miners has reached a new level, as the network’s mining difficulty increased by another 3.44% on Sunday to reach a new level. All-time high of 36.835 trillion hashes.
Apart from the macroeconomic factors that are currently driving all markets, it is precisely this trend that allows us to maintain our firm certainty about a rosy future for Bitcoin. As Metcalfe’s Law aptly states, the value of a network is determined by the number of its connections and its overall flexibility. Robert Metcalfe hypothesized that “the usefulness of a network is proportional to the square of the number of its users”. Now, there is no doubt that there are more participants in the bitcoin network than ever before.
Historically, the hash rate has been a leading indicator of price increases. If you believe this basic proposition in the valuation of bitcoin, an arbitrage opportunity has never been so attractive.
The network gave us two examples this week, both of its strength and the risks of a fully decentralized financial structure. On Sunday, a user transferred a whopping 5,000 BTC ($103 million USD) for a fee of 208 sittings…or about $0.04 USD. All in a few minutes, of course. Try such a feat with your bank! In parallel, the user was reminded that the fees to be paid are chosen by the user, and not by a third party. In a transaction that entered Bitcoin block 760,077, a user paid 1,136,000 satoshi ($0.0136 BTC or $220.52 at the time of the transaction) to transfer 3.8 BTC ($63,000). This extraordinarily high fee is 1,000 times higher than typical Bitcoin transaction fees, because at block height 760,077, the average transaction fee was about $0.20.
The next week leading up to the Fed’s announcement next Wednesday will be full of challenges – and opportunities – for the cryptocurrency market. Will ETH be able to continue the sudden reversal and higher ratio against Bitcoin? Will bitcoin itself be able to confirm a breakout of the $20,500 resistance and attempt to climb to the top of its channel over the past few months? We are watching the first resistance around $23,000, the second at $24,000 formed by the 200-week moving average, and then finally the August high at $25,200. A breach of the latter in a convincing manner would be a clear indication of an exit from the bear market and could undoubtedly lead to fireworks.
The fund is currently exposed to 50% BTC, 45% ETH, and 5% MATIC.
This article is brought to you by Fonds Rivemont. The Rivemont Crypto Fund is Canada’s first actively managed cryptocurrency fund. RRSP and TFSA qualification. Accredited investors can learn more over here.
Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..
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