Bitcoin (BTC) Price Today: Rally Halts At $42,000 But Open Interest At Two-Year High

This week started on a pretty good note with the Bitcoin price rallying past $42,000 on Monday, December 4. However, Bitcoin has entered a partial consolidation and is currently trading at $41,762 with a market cap of $817 billion.

BTC’s Correlation With Equities

Bitcoin’s staggering 150% this year in 2023 has helped it break past its strong correlation with equities. Instead, this year, BTC’s correlation with equities has been on a decline.

Bitcoin demonstrated its resilience and upward momentum by surging 5.8% to surpass the $42,000 mark on Monday. In stark contrast, traditional indicators such as global shares and bonds faced losses at the beginning of the week.

Analysts, including Sean Farrell, the Head of Digital-Asset Strategy at Fundstrat Global Advisors LLC, highlighted this divergence as indicative of Bitcoin’s current low correlation with traditional macro assets.

Courtesy: Bloomberg

Throughout 2023, Bitcoin’s correlations with stocks and gold have diminished. The 90-day correlation coefficient between Bitcoin and MSCI Inc.’s global shares index dropped from 0.60 at the start of the year to 0.18. Similarly, the correlation between Bitcoin and spot gold has declined close to zero from 0.36. This shift indicates a reduced alignment in movements, emphasizing Bitcoin’s evolving status as a distinct and less tethered asset in the financial landscape.

Bitcoin Open Interest At Two-Year High

The open interest in bitcoin perpetual futures on the Deribit derivatives exchange has surged to a yearly high, reaching $740 million. This level has not been observed since November 2021, coinciding with Bitcoin’s all-time high surpassing $68,000.

Courtesy: Deribit

Increased open interest signals a renewed influx of funds into the market, reflecting heightened participation and potential liquidity. Keyrock’s Head of Business Development for APAC, Justin d’Anethan, points to the notable premium on CME bitcoin futures contracts as an additional indicator of heightened institutional involvement.

D’Anethan stated, “One can’t help but notice a healthy futures premium on CME contracts, hinting at some large sophisticated players wanting BTC exposure.” This observation aligns with data from The Block’s Data Dashboard, revealing an all-time high in CME bitcoin long open interest held by asset managers, totaling nearly $2.2 billion.

D’Anethan further highlighted that the increased participation from sophisticated players is likely influenced by the imminent decision on spot Bitcoin ETFs, anticipated to occur by mid/end January. This development underscores the evolving dynamics and growing interest from institutional entities in the Bitcoin market.

On the technical chart, the current Bitcoin RSI stands at 76.5 indicating overbought conditions. An RSI drop under 65 could further help the Bitcoin price rally all the way to $50,000.

📊 #Bitcoin’s #RSI, a highly reputable technical indicator just added to @santimentfeed, measures the speed & magnitude of price changes. After reaching $42K today, $BTC may need a brief cooldown. If RSI stays below 65, $50K quickly becomes more realistic. https://t.co/YP5yhkvaIz pic.twitter.com/IGa3SgV2h2

— Santiment (@santimentfeed) December 4, 2023

While everyone has been talking and excited about the Bitcoin ETF arrival next month, another major catalyst is the Bitcoin halving event ahead in April 2024. Historical trends suggest that the Bitcoin halving has been a major catalyst for the BTC price to rally higher. Analysts have already started giving bullish price predictions of as high as $500,000 during the next Bitcoin bull run.

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