Qume Market Mondays- 18 May 2020

Welcome to another edition of Qume Market Mondays!

We are almost a week into Bitcoin’s third halving and with the price keeping at $9,800 levels, the supposedly high sell pressure won’t be so catastrophic for S17 mining rig operators. This is also good news for long bitcoin traders/investors as this will smoothen the inevitable industry transition from S17 to S19 Antminers.

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(Source — bitinfocharts.com)

Mining profitability has reduced as expected after the halving but with lower electricity costs, low-cost cooling technologies (like liquid immersion cooling) and some other hacks, the breakeven threshold could be lowered for some old mining farms even without S19 Antminers. We expect to see reports of smaller mining farms announcing lower revenues over the next couple of months.

Right before the halving, bitcoin price went to $8,000 levels but has been in recovery ever since.

We have previously noted the rate of bitcoin price recovery amid the coronavirus pandemic which was faster than other traditional market indices. Some sectors are signalling recovery now and the worst economic downturn since the great depression seems to have bottomed out.

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Indexes such as the Gold XAU and the S&P 500 are recovering. Gold like bitcoin recovered relatively faster than other global indices, and XAU has surpassed its pre-pandemic price levels.

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All is not good, however, as Germany confirmed reports of recession last week followed by Japan declaring today, a recession in its last quarter. The manufacturing, hospitality and industrial sectors are still waiting for economies to open up and the production at pre-pandemic levels may take a lot of time with predictions ranging from a couple of months to 5 years.

(Source — McKinsey Global)

Bitcoin’s monthly price movement is now correlating with the S&P 500 after the negative correlation these two markets showed from mid-March to early April.

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Interestingly, the yearly correlation between the S&P 500 and Bitcoin which in the last year was in the band of (-5%, 5%), is now showing negative correlation of around -15% from March. The speedy recovery of bitcoin since March while the S&P 500 was bottoming out could be the reason for such statistical divergence.

Volatility Indices

Bitcoin volatility has increased after the halving, now holding at 4.1% levels. After today’s movement, it is expected to increase again.

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Small arbitrage opportunities in the crypto markets are developing with wide boundaries of 125–200 bps and opportunities arising primarily on BitMEX with a lot of other exchanges.

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(Source — data.bitcoinity.com)

Data Sourced from www.skew.com

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