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Bitcoin/Gold/S&P 500 correlation: Where is Bitcoin Going?

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We still look at Gold prices and then compare it with Bitcoin prices and try to correlate it. We call Bitcoin as the "Digital Gold" but is it truly maintaining that status? And after the recent turnaround in the markets since March, what is the fuss going on regarding the price action of Gold, Stocks, and of course Bitcoin?

Lets have a small look:

Below are three charts, one is for BTC, and one is for S&P, and another one is for Gold, as Reference.

I'll cover a detailed analysis on Gold in a separate article soon

Chart: BTC/USD, 1D:

Link: https://www.tradingview.com/x/nts788CQ/

Chart: S&P 500/USD, 1D:

Link: https://www.tradingview.com/x/qmWz4Lcj/

Chart: XAU/USD, 1D: (wait for the "magic")

https://www.tradingview.com/x/unyN4qOx/

Key takeaways from the three charts:

1 -> Only Gold has managed to break above the previous local top (before the covid crash) to make local highs. 2 -> People were screaming that bitcoin will break above the local top, and its still struggling to hold 9k, with short term bearish signs. 3 -> S&P has the chance of a small breakout, retest the previous all time high as resistance, and break through it, or just start to go down.

So inference from the above charts: BTC is still mimicking the price action of S&P. Can we be 100% sure?

Yes, and No!

  1. Yes because: Bitcoin was born around the time when the Stock markets started recovering from around the 2008 crash.
    a) The stock market has been on a bull run ever since b) The overall macro trend of Bitcoin is still up ever since.

  2. No Because: Zoom out on the charts. S&P (and also gold) will practically appear like a straight line. Can we compare assets with this much difference? Maybe yes, Maybe no.

Lets compare all the three charts:

Link: https://www.tradingview.com/x/S34mUfPd/

So, try to derive a solid long term correlation and I'm 100% sure somewhere or the other, you will lose correlation, thanks to a massive BTC pump, or a massive BTC dump. (with the only exception of the Covid 19 crash, on March 2020)

People have been "correlating" Btc price action with gold on very small time-frames, which may or may not always work out! Its like telling, "Hey, look, the price of potato went up by 5% today, and the price of Bitcoin also went up by 5%, so potato is directly correlated with Bitcoin now!"

Though I don't completely disagree about the correlation part, most of us have been using the wrong scale, wrong time-frames, and the wrong assets.

So, reiterating on all the points above: Here are a few of my thoughts:

  1. Is Gold a safe haven asset?
    Ans: It has already proven itself. YES IT IS, AND IT WILL BE.

  2. Is Bitcoin a safe haven asset? Ans: We are still yet to figure out. It may or may not be.

So if the answer is no, will Bitcoin be worth it? Ans: Yes, because, if there is a mass scale hyperinflation, it will drive prices of all assets to the sky, through the roof. (I'll write about negative interest rates and its effect on the economy in another article)

Again there are two probabilities, since we can "more closely" correlate Bitcoin with the S&P:

  1. In case of a Hyperinflation: BTC Price will soar
  2. In case of a Depression: BTC can revisit even $1k. (I think those 1K bears are probably dead by now πŸ˜‚)

Remember one thing: Many people laugh at gold, thinking its worthless, its unusable, its not feasible, etc etc. Time and again, many people were proven wrong, throughout history. Of course price action in Gold is slow, and isnt as volatile as Bitcoin, and also many gold bugs laugh at Bitcoin, telling its worthless and all, I personally believe, Gold is a better Safe haven asset, but at the same time, I still believe, if Bitcoin starts a run, it will give far better returns than gold.

At present, considering about the market, I do see a good intensity Breakout coming. (It can be in either direction)

If you have a look at the All time highs(ATH), you'll also see:

  1. S&P made a new ATH before the crash.

  2. Bitcoin made a ATH around 2017 end.

  3. Gold made an ATH around 2011, and is approaching the previous ATH around $1930.

These uncertainties are one of the main reasons why I believe we should never go "All in" on anything. The risk should be played out well, otherwise it will be of no use, and we will end up getting REKT.

Bonus:

Want to see how Hyperinflation looks like??

Among many other currencies, The Turkish Lira is one of the currencies, which lost value rapidly, because of a lot of factors (excessive money printing maybe? sounds familiar with present day fed stuff, huh?)

Gold/Turkish Lira:

Link.

And look what the Breakout of Gold on the Turkish Lira pair did (indirectly) to the money. The currency has lost a lot of value and is not worth much now.

I've marked the small rounded bottom intentionally. Have a look at the Gold/USD chart yourself, and zoom out on the 1 week timeframe. do you see a similar pattern on gold weekly chart? Its for you to check now! :)

If you are seeing this, and you liked whats in here, Hit the Upvote button, and share this with your friends :) I'll be coming up with more interesting stuff in future.

Posted Using LeoFinance