The digital gold story and the hyperinflation fears that loom as the economy weakens and more fiat money is printed have taken Bitcoin to incredible heights and done so so quickly. However, given the history of cryptocurrency with terrifying drawdowns, things could change in the short term.
One sign that Bitcoin could get into trouble soon is the cryptocurrency versus gold trading pair, which has hit a TD 9 sell setup in monthly periods. If the signal is confirmed, it suggests that the current trend is exhausted and that an upswing is coming sooner rather than later.
Bitcoin continues to beat the gold standard in its own game
Gold’s reputation as a safe haven and store of value was tarnished for the first time in its long history. According to brilliant entrepreneurs like Mark Cuban and other top Crytpo analysts, precious metals are being demonized by companies like Bitcoin and Ethereum.
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The 2020 digital gold narrative caused the bull gold market to rise and Bitcoin to begin. Since then, the leading cryptocurrency by market capitalization has hit $ 1 trillion in market capitalization, taking a bite out of ten times its gold capitalization.
If the scarce cryptocurrency can raise that much capital, it will trade at prices of $ 500,000 per coin or more. And while Bitcoin is indeed rapidly approaching trillions of dollars in capital, the divergence between the two assets has grown significantly and a reversal signal has occurred.
Gold has fallen nearly 84% against Bitcoin in a few months. Could a bounce be coming? | Source: BTCUSD on TradingView.com
How Metal Reversal Could Take Revenge On Crypto
Over monthly periods, the TD Sequential indicator has released a TD 9 sell setup, suggesting that the steep downtrend in the red candles should soon be reversed. Simultaneously with the decline, which has started solely since October 2020, gold has fallen 84% compared to the Bitcoin price.
Interestingly, Bitcoin fell a full 84% before bottoming out in late 2018. Could Total Percent Loss be an ideal place for this trading couple to turn around as well?
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No one can say for sure, and neither can the TD Sequential indicator, despite its accuracy. The signal often drops out, and when it does, the resulting movement is even stronger. However, markets tend to reverse when sentiment hits extremes, and sentiment in metals versus crypto is on the other side of the spectrum.
For example, gold was recently removed from the list of Morning Brew market tickers for Bitcoin. But could that really be a sign that the mood is nearing a high point? When Bitcoin flips over, it has historically been known to correct up to 84% as mentioned earlier. Could this be the case in the crypto markets in the coming days?
Featured image from Deposit Photos, Charts from TradingView.com