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Tackle Today: Bitcoin Proxies

September 7, 2021

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≈ Which stock best follows Bitcoin? ≈

Traders,

We’re returning from a weekend where Bitcoin once again stole the show. As I’m writing this Monday night, Bitcoin futures are up 5%, pushing toward $53k. The king of crypto is putting together quite the track record for its weekend performance. Nearly every major breakout in recent memory has occurred over a weekend. The consistency has honestly been uncanny.

Traders unwilling or unable to buy crypto directly have turned to a handful of stocks that seem to be moving somewhat with bitcoin. As such, they’re often used as proxies to get exposure. I’m thinking of MARA, RIOT, and GBTC, to name a few.

Rather than taking the relationship between these three and bitcoin at face value, you can actually measure and track the degree to which they are correlated. The indicator you want to use is known as “correlation.”

If you set /BTC as the benchmark, it will measure the correlation between whichever stock you’re looking at relative to bitcoin. The reading ranges between +1 and -1, where +1 reflects a perfect positive correlation. That means the stock you’re looking at always moves in the same direction as bitcoin.

The opposite is true for a reading of -1.

Currently, GBTC has the highest 10-day correlation with bitcoin at 0.87. MARA comes in second with 0.51. RIOT is the worst of the bunch at -0.55, which means it’s been mostly moving inverse to bitcoin.

#TeamTackle


Chart of the Day

Grayscale Bitcoin Trust (GBTC)



Say what you will about GBTC, but the symbol has allowed traders an effective vehicle for tracking bitcoin so far. The size of the moves and leverage may be different, but its directional movements have lined up very consistently.

Video of the Day

Coach Frank’s Charts

Watch this clip from Friday’s Halftime Report where the coaches analyze Frank’s charts and discuss their potential trading setups on stocks like International Paper, Array, DataDog, Wal-Mart, Tempur-Sealy, and EBAY.


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