The announcement of positive vaccine data on Monday sparked many long/short portfolio managers and traders to unwind positions that many described as “the covid trade”, and has led to 2 days of violent dispersion in financial markets. This morning, equity prices are starting to stabilize and correlations are starting to creep back up. During the tumultuous rebalance, BTC came under only a small amount of pressure, and rebounded quickly. Overnight, it crossed the $16,000 threshold for the first time in 3 years.

The price action in BTC since Monday morning has given more evidence to suggest the strong undercurrent of money flows into the asset from both institutional and retail is the stronger force, relative to the selling pressure from traders reducing their exposure to the long tech/gold/btc short energy/banks/dollar trade that many have had on over the past 7 months.

Unless some unexpected new development rears its head, I don’t expect that positive pressure to subside anytime soon. In the near term, I anticipate that BTC correlation with gold and (inverse) dollar will come back up a bit, but I think a strong positive drift from new investments will continue to buoy the trend beyond what that correlation would imply.

 

 

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