Gold in the Early Days of a Bull Market; Is Bitcoin Currently in a Downtrend in One Too?
Last week, the price of bitcoin climbed to $10,000 but yet again we couldn’t sustain this level and over the weekend dropped to as low as $8,200.
This drop came on the back of the “highest hourly volume candle” since Black Thursday. Interestingly, it also had Bitcoin trending on Chinese Twitter.
“Almost 9 months since higher lows on Cycles, so technically still downtrend, until >10.5k,” said analyst Bob Loukas.
This crash yet again caused Coinbase outage resulting in $275 million sells liquidated, the third-largest liquidation in the past six months. BitMEX XBTUSD open interest also sold off $100mln.
OI got wiped out across the board, with Binance “absolutely nuked.”
Now, BTC/USD is back to trading above $8900.
Getting Worse Before it Gets Better
Bitcoin might be up 20% YTD but its correlation with stocks remains near its all-time high still.
The US stock market is moving higher despite a record number of Americans losing their jobs. The unemployment surged to 14.7% in April, shattering the post-WWII’s record of 10.8% in Nov. 1982.
But on Sunday, Treasury Secretary Steven Mnuchin said this figure could get “worse before they get better.” He also indicated the White House was talking about more fiscal measures, payroll tax cut, to ease the economic pain from the coronavirus pandemic.
But the fact that stocks are still moving higher, could mean they have rebounded and can continue to move higher.
“We’ve seen the lows in March and we will never see those lows again,” said Wharton professor Jeremy Siegel who called Dow 20,000 in 2015. “I think 2021 could be a boom year.”
Last week, JPMorgan also listed six reasons why they are bullish on stocks including rapid healing of credit markets and relaxation of lockdowns. The “signs of bottoming out in economic expectations” and the “presence of an equity short base and equity underweights among investors,” are other reasons.
Besides the rally in the risky market, massive liquidity injections and zero cash rates and low bond yields are why stocks and risk-on securities are in a bullish environment.
But not all!
SPX made a clear 5 up on dasily and now it looks like a C wave down might begin tonight.
2200 now does look like a major low to me due to the impulsive 5 wave rise.
this dip should be bought imo pic.twitter.com/MK16Jchn2X
— 🍄🌲Benjamin Blunts🌲🍄 (@SmartContracter) May 11, 2020
Although economist and trader Alex Kruger says JPMorgan’s 3400 target for the S&P 500 in H1'2021 is “reasonable,” it ignores potential bearish factors like demand not coming back in full on contagion fears, Trump going all out at China, Presidential elections, a wave of defaults, no buybacks, dividend cuts, worldwide social unrest, an EM collapse, and broken supply chains.
Most Likely to Appreciate in 2020
Amidst the current unstable economic backdrop, Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence says both bitcoin and gold are the assets that they believe will jump this year.
#Bitcoin and #gold sit atop our list of assets most likely to appreciate in 2020, on the back of unparalleled central-bank easing. Both have had significant shakeouts. Bitcoin is in an extended period of trading within a range and will eventually break out higher, in our view. pic.twitter.com/EuqUgNjsIN
— Mike McGlone (@mikemcglone11) May 8, 2020
Gold bullion is in the early days of a bull market just like the one sparked by the financial crisis, with “greater potential for acceleration in the metal's price.” Quantitative easing with rising equity volatility solidifies the precious metal’s foundation, he said.
Bitcoin, the result of the 2008 financial crisis, also has a long road ahead with a new rally.
“As central banks flood the financial system with trillions of dollars of stimulus, investors today have a strong reason to invest in alternative assets like Bitcoin,” states Binance in its latest report.
In the short term, however, it depends if Bitcoin holds $8,550 level. The breakdown from $8,550 could have us revisit the high of $7000s and if it holds, we can get a relief rally to the low of $9,000s, said analyst Rekt Capital.