Is Bitcoin Becoming A Leading Indicator For Gold?

Tony "The Bull" Severino

Last Updated: October 7, 2020 11:27 am

3 mins read

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Throughout 2019, Bitcoin and gold became highly correlated, rising and falling in value at or around the same time, and further fueling the Bitcoin as a safe haven narrative.

Even now, the two assets are showing similarities in their price charts that suggests they are still correlated in some way, and gold could soon be following Bitcoin and making a “deep cycle low,” much like the leading crypto by market cap did last month.

Is The Precious Metal Ready To Set a Cycle Low in December?

As tensions between the US and China were heating up and fears of a looming recession mounted, 2019 has thus far been the year of the safe haven asset – namely, the precious metal gold and its digital gold counterpart, Bitcoin.

The two assets rose and fell hand-in-hand as investors fled stocks and other traditional investments. Eventually, though, just as Bakkt launched in late September, Bitcoin diverged and dropped over $2,000 in less than 72 hours, erasing over 20% of its 2019 rally.

With the assets showing such similar performance, could Bitcoin somehow be a leading indicator for gold? Just before Bitcoin broke down, it had been consolidating at the top of its rally and trading inside a triangle pattern before its big fall.

Gold is very cyclical and is due a deep cycle low in Dec. working towards that.

— Bob Loukas 🗽 (@BobLoukas) October 13, 2019

According to gold charts, the precious metal is trading inside a very similar pattern and could be at risk for a deeper drop ahead.

Career trader and investor Bob Loukas backs up the theory, suggesting that gold is ready for a correction much like Bitcoin’s, and could put in a “cycle low” in December.

Investors Seeking Safe Haven Assets Driving Both Bitcoin and Gold

Although Bitcoin may appear to be acting as a leading indicator for gold currently – given the shape of the pattern gold is now trading in looking eerily similar to the formation Bitcoin just broke down from – the leading crypto by market cap has been following a fractal from gold’s price charts.

Even Bitcoin’s recent triangle pattern and drop were first seen on gold price charts, and if the fractal continues to be followed, it suggests a very long, drawn-out consolidation phase where Bitcoin trades mostly sideways – the epitome of max pain for those accustomed to the wild price swings and volatility in crypto markets.

The truth is, neither asset is likely to be following or leading the other, but due to their like-attributes they behave similarly. Markets and price fluctuations are driven by the emotional state of investors. And with each asset being attractive to the same sub-set of investors, the emotions driving each market are bound to be similar as well.

Feature image from Shutterstock

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.