The last 24 hours of trading saw Bitcoin decoupling from gold and stock markets as its price surged above $13,000.
The BTC/USD exchange rate added $212, or 1.66 percent, to trade near $13,020 as of 1739 UTC. At its intraday high, the pair were changing hands for as much as $13,095, a level it last breached only yesterday before establishing a year-to-date peak near $13,250.
Testing levels above $13,000 two days in a row presented $12,700 as a credible support level. There, traders showed signs of substantial accumulation, thereby underlining their intentions to continue the upward momentum beyond the current yearly high. And their bullish sentiment borrowed cues from convincing market fundamentals.
PayPal FOMO
The origins of the current rally lie in PayPal. On Wednesday, the world’s leading payments platform announced a new service that will enable users to buy, sell, store, and spend Bitcoin from existing PayPal wallets. The announcement caused the Bitcoin price to spike from $12,000 to over $13,000 within a few hours of trading.
Analysts treated PayPal’s foray into the cryptocurrency sector as further validation of Bitcoin as an emerging mainstream asset. They anticipated that PayPal would boost Bitcoin adoption among its millions of users, which, in turn, would push its value further upward.
“PayPal is an important bridge between the mainland and the island of crypto,” wrote Tyler Winklevoss, the co-founder/CEO of US-based Gemini exchange. “The diaspora from legacy finance is happening and this is the kind of infrastructure that will help make that happen. Soon there will be a flippening and crypto will be the mainland [and] fiat the island.”
Bitcoin Correlation Breaks
The PayPal FOMO allowed Bitcoin to steal the global spotlight two days in a row. The crypto, which had earlier formed an erratically positive correlation with US stocks and gold, decoupled from them after the PayPal news. For some, the signs were clear: the cryptocurrency started to emerge as an independent asset.
“Gold is breaking down versus bitcoin, as expected,” wrote Raoul Pal, the founder/CEO of Global Macro Investor in Grand Cayman. “The next thing I’m expecting is the correlations between BTC and the dollar and BTC vs equities to break down too.”
As of today, the drop in the US stock and gold market came on the US dollar’s strength. The greenback, in turn, rebounded higher because of an ongoing delay in the second coronavirus relief package amid a political indecisiveness over its size. But unlike those two markets, Bitcoin held onto its gains in positive territory.
The correlation may resume once the PayPal hype settles. Meanwhile, some analysts expect Bitcoin to correct lower because of risks concerning “Long Squeeze.” As of now, more than 80 percent of derivative positions are Long bitcoin, which means that even a small drop in the spot market could cause a sequence of massive sell-offs.