Bitwise Analysts Apply ‘Peel Back’ Approach to Gauge Bitcoin (BTC)

In a letter to investors, crypto-asset management firm Bitwise uses a “peel back” approach to assess the value of Bitcoin (BTC) amidst the global pandemic that has rocked the financial markets and jump-started trillion-dollar stimulus packages to rescue economies.

As stocks, gold and equities experience unprecedented turmoil and turbulence, the firm analyzes Bitcoin as an alternative investment, weighing where it fits in and how it continues to weather a brutal financial climate.

Zooming in on the middle of March when the S&P 500 took a nosedive, posting its second-largest single-day drop as well as its largest single-day percentage gain, the analysts suggest that every market, including real estate, crypto, stocks, bonds and gold, remained under pressure by macro factors, sinking Bitcoin to a yearly low below $4,000 on March 13th and thrusting the entire crypto market into the red.

The analysts write,

“Bitcoin’s March sell-off caused some to ask: What good is a hedge asset if it sells off when the market pulls back?…

If you peel back just a little bit, the long-term noncorrelation becomes apparent. For the 12 months ending March 31, 2020, bitcoin is up 55% while the S&P 500 is down 8%. For the trailing three years, the numbers are bitcoin +463% and the S&P 500 +16%.”

Bitwise concludes that despite the immediate impact of the coronavirus, which triggered the passage of trillion-dollar rescue packages to prop up ailing economies amidst historic job losses, industry-wide shutdowns and stay-at-home orders, Bitcoin’s rebound and long-term trend indicate “an unimaginable stress test under its belt.”

“During a period which saw multiple days of historic drawdowns in financial markets, bitcoin—an asset over 5x more volatile than the S&P on average—didn’t plummet like oil or a penny stock or emerging markets equities. To the contrary, it had some of its calmer days relative to historical volatility.

Like all financial assets, there are days when correlations go towards one as everyone sells, but measured even over the three months since the coronavirus was first identified by the World Health Organization, crypto has shown remarkable strength.”

You can check out the Bitwise investor letter here.

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