Will BTC Follow TradFi Gains?

ATHs Inbound? The S&P 500 has staged a respectable resurgence in the past several days, pumping 3.7% off its Thursday lows and continuing to rally into this week. Crypto markets may be starting off the week flat, but is the TradFi rally foreshadowing gains to come?

BTC did not enjoy gains alongside stocks on Monday, yet is up 12% off its Thursday local lows and is now attempting to break above its 50-day exponential moving average (EMA), the very same technical resistance level that TradFi indexes struggled to crack throughout the end of April.

Correlations between BTC and major indexes have strengthened in recent weeks, indicating that price movements of these different asset classes are occurring in the same direction. Should indexes continue the march higher, the price of BTC will begin moving upwards in short order assuming the correlation manages to hold.

A decisive break above the 50-day EMA would allow BTC to obliterate the $65k resistance level that has hampered bulls since mid-April, putting it squarely above the mid-range and leaving the path to retest the top of the range at $72k unabated!

On Thursday, BTC perpetual swaps saw their longest and deepest period of negative funding rates this year (i.e.; shorts paid longs), anomalous behavior given the recent thirst for leverage, and while funding rates are again positive, they have yet to become problematic for bulls as they were toward the end of March, maintaining “healthy” levels at which longs are not paying exorbitant fees to remain in their positions.

Lower funding rates reduce the risk of time-based capitulation and may increase demand for long positions, however, their consistent compression throughout April and the increased negative magnitude of the most recent drawdown suggests that we could be transitioning to a regime of structurally lower funding rates. Such a shift would likely coincide with declining prices.

Unquestionably, market prices should be rebounding if we are destined to maintain the uptrends that have been supportive for price since the end of the 2022 bear market, but nonetheless, it remains important to note that a pull back prior to new all-time highs could provide confirmation that we have entered a different phase of the market…