Bitcoin (BTC): Helped or Hurt by Gold?

January 30, 2019 / by Bill Noble

Gold (GC) has been on a tear lately. Yesterday, gold futures made new highs for the recent up move.  Gold futures are now above $1,300 after being near $1,200 in mid-November (not shown). Meanwhile, Bitcoin (BTC) languishes.

As a point of trivia, this might be reminiscent of the how Bitcoin (BTC) and gold (GC) traded in December of 2016 and January of 2017.

Gold (GC) bottomed on Dec. 22, 2016, and rallied hard into the end of February (Figure 1). Bitcoin (BTC), on the other hand, did a violent shakeout in early January going from $1,150 to $750 in a three day period. After all the longs were shaken out, Bitcoin (BTC) steadily rose until the beginning of March (Figure 2).

 class= Figure 1

 class= Figure 2

So, net-net, the rally in gold was a leading indicator that a rally in Bitcoin (BTC) was coming in early 2017.

Naturally, the one difference between what is happening now and the start of 2017 is that Bitcoin (BTC) is discouraging people by doing nothing rather than shaking longs with a sharp decline.

You may not believe that the gold rally is a precursor to a Bitcoin (BTC) rally. The news out there is not the best. Fidelity announced that its institutional custody solution will not be ready until March. That’s an eternity in crypto and could indicate that Fidelity expects more downside. There have reports by investment banks and other news sites confirming a suspicion from the Crypto.IQ Trading Desk that the cost of production for Bitcoin is near $2,500 — and price may drop to that point.

Bottom Line: Bitcoin (BTC) needs to start to rally and follow gold (GC) within the next five days. If it does, it could be fantastic for Bitcoin (BTC) and crypto as a whole. If Bitcoin (BTC) does not start following gold (GC), it may be a sign that Bitcoin (BTC) is in big trouble. That could lead to a decline in Bitcoin (BTC) to the cost of production near $2,500.

The Crypto.IQ Trading Desk has got a view on this issue, and they are in the process of trading it as we speak.

Join me there and see how their strategies play out.