Bitcoin and gold have been tracking alongside one another for nearly two years now as the global economy inches closer and closer to total collapse.
If the correlation continues, the latest drop in Bitcoin will be nothing more than a bear trap designed to shake out investors before the asset reclaims a long-term trend line and continues its ascent toward new all-time highs.
Correlation Continues Between First-Ever Cryptocurrency and Precious Metal
The argument over if Bitcoin truly is a safe haven asset like gold and other precious metals continues, as the two assets have shown an uncanny correlation in the past.
The correlation has gone on forward first spotted following Bitcoin’s 2017 peak, but the comparative price action really ramped up in early 2019, as a trade war between China and the United States started to brew.
Related Reading | Becoming a Safe Haven: A Year of Bitcoin Correlation With Gold
In early 2019, both assets began a new bull run and spent the next few months rallying. Both eventually experienced a pullback in mid-2019, but later began to pick up steam late into the year and into early 2020.
At the start of 2020, both assets began to skyrocket, as fears over a possible pandemic began to grow.
These fears eventually became reality, and panic spill into financial markets. The result was record-breaking drops in major stock market indexes, gold, and Bitcoin. Some assets, like silver, had over a decade worth of growth wiped out in hours.
But now both assets are recovering once again, and are ready to prove themselves as safe-haven assets in the face of the coming economic crisis.
Will Bitcoin Continue To Follow Gold With a Bear Trap Shakeout?
Along the way up, gold broke down from a long-term trend line. During the recent collapse across all markets, Bitcoin lost its long-term trend line also.
Gold’s break below the long-term trend line was a bear trap designed to shake out investors and force them to buy back higher, further driving the price of the asset upward.
The same breakdown of a long-term trend line just happened in Bitcoin markets, and the price action and signals on the relative strength index appear to be eerily similar to that of gold when the bear trap happened.
The combination of the two assets pacing together accurately for some time, and the fact that both price action and indicators are showing strong resemblance, gives the theory additional credence.
Related Reading | Stocks Limit Up, Gold Revisits High, is Bitcoin About To Pump?
However, it’s worth noting that the timescales are drastically different between the two assets, so the comparative analysis should be taken with a grain of salt. But given how close the two assets have been correlated, a bear trap in Bitcoin is very possible.
Featured image from Shutterstock