Recent reports suggest that Bitcoin is poised for a significant surge. Pantera Capital CEO, Dan Morehead, believes that Bitcoin (BTC) has emerged from a prolonged bear market and is now at a turning point.
The decline of Terra and FTX
Morehead’s update states that following the decline of Terra and crypto exchange FTX, the industry has endured sufficient pain to prepare for a bullish market.
Morehead said this:
“Having traded 35 years of market cycles, I’ve learned there’s just so long markets can be down. Only so much pain investors can take. It’s been a full year since TerraLUNA/SBF/etc. It’s been enough time. We can rally now.”
The CEO believes that digital assets have become separate from traditional markets, which means that any potential weakness in equities or bonds may not have as much impact on cryptocurrencies as some analysts may think.
According to the CEO, blockchain has significantly decoupled, although this may not be immediately apparent. Throughout the majority of blockchain assets’ history, there was essentially no correlation to risk assets.
If we use Bitcoin as an example, its correlation with the S&P 500 during the first nine years of its existence was 0.03.
This was a significant argument in favor of Bitcoin as a new asset class with high returns and little correlation with typical assets, making it an ideal investment.
Unfortunately, the correlation spiked up to 0.76 last year due to excessively-leveraged centralized entities and alleged criminal activity from figures in the blockchain space.
As blockchain is not connected to interest rates, it should have a low correlation to the main asset classes (stocks, bonds, real estate), which are all closely linked to rates. Currently, Bitcoin’s correlation with the S&P 500 is below 0.1.
When the correlation coefficient is one in statistics, it indicates that assets are highly likely to move together. Conversely, a correlation value closer to zero suggests a weak linear relationship between assets.
According to Morehead, Pantera, which has seen a growth of 41,960% since its inception, is anticipating a single catalyst that will push Bitcoin to new heights.
