Bitcoin (BTC) Price Diverges From Gold Again as Correlation Grows
Bitcoin and Gold have had a complex relationship in terms of their markets. The precious metal has often been seen as a safe haven for investors in start contrast with the high risk, and high reward, Bitcoin.
However, their opposite correlation extends further than their investability as there is evidence in the charts in the last five months that gold’s direction is being expressed in mirror image by Bitcoin. In other words, when gold is on the rise, Bitcoin falls, and vice versa.
Leading its own way
Cryptocurrency markets have been cutting their own path of late, through a so-called cryptocurrency spring in 2019. The major coin, Bitcoin, topped $9,100 this year but quickly corrected back down below $8,000.
The pullback was expected as technical charts were reporting bullish exhaustion. Adding to that, the cryptocurrency decoupled from equity markets when it rallied by nearly $4,000 in May.
This correction while seemingly predictable is interesting as it is also saw a sharp rally in gold prices. The well known investable metal picked up as high as $1,275 per Oz on May 30 and climbed to $1,344 per Oz this week. – the highest level since Feb. 20.
A developing trend
It is not just this one instance of inverse correlation that has been seem, In November last year, prices crashed below the long-held support of $6,000 after Bitcoin Cash forked. While this was more than likely the catalyst, there was also inverse action in the gold market as it went from $1,200 to $1,300 and further extended the rally to $1,346 in February.
When Gold then fell back again in early May, it was Bitcoin’s turn to spike up once again and reiterate the inverse correlation. Gold dropped by about six percent but Bitcoin was up 76 percent from its December lows.
With all this being said, it must be noted that correlation does not necessarily mean causation. And the catalysts within the Bitcoin market have had nothing to do with gold or other stocks and assets.
Trying to read the markets
Bitcoin analysts and traders have been trying for some time now to get a handle on market trends and charts in the cryptocurrency space. However, because the market is so nascent and untested, it is difficult to try and use too much technical chart analytics for predictions.
That being said, whenever there are some sort of patterns, in this case inverse correlation, it is still worth taking note of as stronger patterns and predictions may start growing from these instances.