Friday, February 3

Is Bitcoin like a Chinese electric car?

Founded in 1995, the Chinese company BYD is known for providing lithium batteries for Motorola cell phones. Later, in 2005, it entered the electric car market. Its expertise in the field spread to the production of battery-powered buses in 2009, including a partnership with UK market leader ADL.

But after all, what is the relationship of the Chinese electric vehicle and utility manufacturer with Bitcoin? In theory, very little, but this is not what we find in practice, as shown in the chart below.

Fonte: TradingView

BYD (1211.HK) listed on the Hong Kong Stock Exchange, in US dollars, is the orange line on the left scale. On the opposite side, in blue, we have Bitcoin. The similarity in movements is impressive, and more curious is the fact that the Chinese company has anticipated some rallies and tops of the cryptocurrency.

Even the Chinese automaker’s all-time high came at $325 on October 26, so 15 days ahead of Bitcoin’s $69,000. It only remains for us to raise some hypotheses, and understand that the phenomenon is not new, as the correlation has lasted almost 3 years.

The global fund industry, which exceeds US$ 110 trillion, has US$ 17 trillion in passive funds and ETFs, that is, those that must follow some indicator. Not to mention active funds, where the manager is not obliged to follow a certain portfolio, but at the same time has a benchmark.

In short, more than half of equity funds are likely to follow indices, be they stocks, commodities, currencies, technology, China, debt securities, among others.

Large funds classify assets into sectors and regions, in the analysis model known as “top down”. In this way, they start from a broader view, including economics, politics, and general price levels.

In this sense, it is possible to understand that Bitcoin and BYD can be seen as “technology” bets, causing these gigantic funds to operate both simultaneously.

Similarly, macro funds that seek “risk” look for highly volatile assets to take advantage of global movements such as the Federal Reserve’s rate change, or fears of the impact of restrictive economic policies.

The proof of this? THE Canadian subsidiary Fidelity management announced on January 10 that it would add Bitcoin exposure to 3 generalist funds. Remembering that most hedge funds, or hedge funds, do not need to change their statutes to invest in Bitcoin funds or derivatives.

in doubt is better follow BYD’s actions (link)!