Next Stop for Bitcoin...And Risk Appetite

One of the more interesting aspects about Bitcoin and rise in popularity of crypto in recent years has been the increasing correlation between Bitcoin and general risk appetite in markets. Although Bitcoin is being touted as a better alternative to fiat currency than gold or just about anything else, it continues to function as, well, a risk asset. I recognize that there are various theories about this, mainly due to Bitcoin still being in its early adopter phase, to speak. 

But nowhere was this seen more than back in March 2020 with Bitcoin trading down sharply with stocks only to rebound just as violently the rest of the year.

Fast-forward to this week, and the Bitcoin weakness alongside crypto proxy stocks like MARA and RIOT drive home the idea that Bitcoin is undergoing a correction off recent all-time highs.

In and of itself, there is nothing particularly noteworthy about that, except that the stock indices had diverged and mostly still are as we speak, pushing higher yet even as Bitcoin comes in. The small caps in the Russell 2000 are lower, however. 

So I will be looking to see which side of this divergence wins out. 

As for Bitcoin targets, the multi-month chart, below, shows a descending triangle vulnerable to a breakdown near-term. If so, the January 4th support of $31,431 seems to be the most likely next level down to watch for buyers to defend.