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Willy Woo: Bitcoin’s decoupling from the stock market supports Bitcoin’s “ultimate safe haven” status
Crypto statistician Willy Woo said that Bitcoin (BTC) has begun to delink from the US stock market S&P 500 index.
The first sign of decoupling between BTC and the stock market. The buying order brought about by the influx of new users provides price support and prevents speculators from trading down this correlation. NVTP estimates the value of Bitcoin through the speed of organic investors on the blockchain. —Willy Woo (woonomic) October 29, 2020
He predicted this behavior in late September, and he asserted that due to the influx of new users, Bitcoin will break the connection with the traditional market:
“Bitcoin will soon decouple from the traditional market, but the driving factor is the internal adoption of the S-curve (entrepreneurial growth), rather than traditional investors changing their perception of Bitcoin as a hedging tool.”
The network value to transaction ratio (NVT) is an indicator launched by Woo in 2017. The analyst said that although the S&P index has fallen sharply in recent days, Bitcoin NVT has shown clear price support.
NVT can be compared to Bitcoin’s price-to-earnings ratio (price/return), but since Bitcoin has no profit in the literal sense, Woo replaces the price-to-earnings ratio with the ratio of the network value (the market value of Bitcoin) to the daily transaction volume on the chain.
Two days ago, Bitcoin NVT (price support) climbed to a record high above $11,000.
Woo added that indicators indicate that if stocks continue to fall, Bitcoin may begin to regain its status as a “safe-haven asset”:
“This test shows that if the stock market crashes, Bitcoin will become a perfect safe-haven asset by attracting more and more capital driven by its large-scale adoption of the s-curve.”
On October 26, Morgan Creek co-founder Anthony Pompliano claimed that “Bitcoin is the ultimate safe haven”, and the market is proving this. He added that Bitcoin “has no correlation with the stock market.”
Not everyone thinks that Bitcoin is decoupled from the stock market: Analyst Scott Melker tweeted in May this year that the stock market and Bitcoin are “not relevant now, and there was no correlation before.”
Earlier last week, cryptocurrency investor Chris Dunn hinted that there has been a negative correlation between the stock market and Bitcoin. This prompted Woo to reiterate his position that Bitcoin is a safe alternative to traditional assets:
“It makes sense that Bitcoin will continue to be relevant in short-term transactions; but not in a longer time frame. Bitcoin is a safe haven, but the’chasing risk’ (meaning very novel) distorts this fact.”
However, some analysts believe that paying too much attention to the correlation between Bitcoin and the S&P 500 index can be dangerous. Analyst Michaëlvan de Poppe said that when the situation becomes messy, as in March this year, “all correlations tend to one”.
“Since then, with the exception of the stock market, gold, silver and Bitcoin have shown resilience and strength in any downtrend. Don’t fix yourself on these correlations.”