The chart shows Bitcoin (blue) and the MSCI World Index (red) on two different scales. Major cycles in Bitcoin appear quite closely related to those in the stock market. Formal analysis shows that in recent years, Bitcoin has a beta of about 2 to the market but also a very high alpha and also of course a lot of extra volatility. The relationship of the price of Bitcoin to a 4 year cycle around halvings could just be coincidence. However, the high alpha shows that there is a strong upward trend that is uncorrelated to the stock market. Economic theory would show that the price of Bitcoin is mainly demand driven. The rewards that Bitcoin miners get drive the number of miners rather than mining costs driving the price of Bitcoin. For the price to continue to rise we need to have increasing demand. The recent introduction of ETFs is an example of that.
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