Bitcoin’s NVT hits a record high while the stock market is falling, which for Willy Woo is a sign of decoupling.
The statistician Willy Woo now wants to have found the first evidence for the often-voiced assumption that Bitcoin is increasingly decoupling from stock markets.
Gentle September Woo had predicted that Bitcoin a corresponding make uncoupling is:
„Bitcoin will soon decouple itself from traditional financial products, whereby it is primarily driven by adoption in the form of an S-curve (similar to a startup) and not by its function as a means of protection for investors“
In his tweet mentioned above, Woo refers to the Network Value to Transaction Ratio (NVT), a metric he designed himself in 2017 . From the comparison between Bitcoin’s NVT and the current price development of the important S&P 500 stock index, Woo deduces that the cryptocurrency has found solid support and is climbing up while the stock market is sliding down. For him a clear sign of „decoupling“.
The NVT is something like the price-earnings ratio of Bitcoin, only that the cryptocurrency does not make a profit in the sense of a company. Woo therefore replaces this variable with the “Network Value”, i.e. the market capitalization of Bitcoin, and the daily volume of transactions in US dollars.
Two days ago, Bitcoin’s NVT hit a new record, above the old $ 11,000 mark, which underscores the current strength of the cryptocurrency.
Bitcoin’s NVT at record level. Source: Willy Woo
Woo interprets this to mean that Bitcoin could soon regain a status as a „safe haven asset“, i.e. as a means of protecting against the uncertainty in the financial markets, if the stock market continues to lose:
„This shows us that when the stock market crashes, Bitcoin is in the best position to raise even more capital, because the S-curve of adoption offers the perfect properties of a safe-haven asset.“
Morgan Creek Digital co-founder Anthony Pompliano had this theory on October 26 new food given when he said that Bitcoin even the „ultimate safe haven“ was because the cryptocurrency have the weakest possible correlation with the stock market.
However, the crypto experts do not agree on whether such a decoupling is currently taking place, because as analyst Scott Melker had already written in May , there has never been a correlation between the stock market and Bitcoin.
Meanwhile, crypto trader Chris Dunn says that there is indeed an interaction that would now take the form of a negative correlation. However, Woo replied that he continues to see BTC as a clear hedge to traditional financial markets that is independent of them:
“It makes sense that BTC will continue to be correlated in the short run, but not in the long run. BTC is a means of hedging, but its usability as a means of speculation distorts that somewhat. „