If Bitcoin Follows Gold, We Might Just Be In For A Rally
For some reason or another, one of the most popular forms of analysis in the Bitcoin (BTC) market is the use of fractals, which tries to see if historical patterns are playing out on current charts. According to one TradingView analyst that goes by “TradingShot“, the one-day chart for the leading cryptocurrency is currently looking like the chart of gold, but on a much shorter time frame.
In a recent post, TradingShot noted that for the past year or so, Bitcoin’s one-day chart has effectively followed gold’s chart from 1980 to 2000. In that time frame, gold reached a historic peak after the 1970s bout of inflation, rapidly fell in 1982, then traded in a tight range, holding over key price levels, until 1997, which saw gold fall to lows not seen in decades. Then, in 1999, gold spiked, rallying massively. Although this sounds nothing like Bitcoin, BTC went through the exact same cycle of a rapid plunge off highs, a long period of range trading, a massive downturn, and then a strong recovery.
Thus, TradingShot postulates that if the trend of Bitcoin following gold’s long-term chart continues, BTC may just be in for a further move higher. He explains that when gold saw a long-term golden cross in the recovery after the aforementioned collapse to fresh lows, it rallied strongly, not stopping until the 2008 Great Recession. If BTC mirrors this price action on a shorter time frame, BTC could breach $10,000 as soon as July, and may even continue higher. He explains:
What is also obvious though, is that if Bitcoin continues to follow Gold’s early 2000s price action, and more particularly its Golden Cross, then it will continue to aggressively rise towards new All-Time Highs without any last pull back as it did in 2015.
This wasn’t the only bullish sign that the analyst drew attention to, however. TradingShot then pointed out that Bitcoin, prior to every halving event (which is one year away), always moved to test its fair value, as defined by stock-to-flow ratios. As it stands, BTC’s fair value is approximately $8,000. And if history is of any future indication, then Bitcoin could touch that level as soon as August 2019, or, at the very least, by the end of the year. And after that, BTC should begin rallying even further.
It is important to note that it wasn’t exactly all sunshine and rainbows.
Medium-term indicators, too, are looking bullish for the asset.
As spotted by prominent analyst Josh Rager, Bitcoin’s three-day Guppy, an indicator that uses moving averages to identify trends and breakouts, is about to flip green for the first time since late-2015, which was when BTC began its historic rally from $250 to $20,000.
What’s more, the 200 exponential moving average on the three-day has been recently crossed by Bitcoin. The last time these two technical events occurred in rapid succession, what followed was decidedly bullish price action for months on end. But the question remains — will past performance be indicative of future action?
Photo by Joshua Sortino on Unsplash