The Bitcoin (BTC) classification is a controversial and difficult topic for crypto-enthusiasts, investors and regulators to reach a consensus. Digital assets have not been compared to a currency, a commodity, an investment asset, or an underlying value. However, from the point of view of regulators, bitcoin is mostly associated as a commodity and is being studied, especially in relation to gold. In fact, many times bitcoin is known as “new gold” or “digital gold”.
This week, tensions rose between the United States and Iran, with gold becoming the most expensive in 6 years, while the price of BTC rose nearly 20%. Thus, analysts are attempting to reevaluate the extent to which commodity and other traditional assets are linked to bitcoin’s long and short-term price action.
Looking at the price action of bitcoin and gold from April 2013 till now, it can be said that gold reached its peak in 2020, while bitcoin reached its maximum price at the end of 2017 itself. But how are they related to each other?
When calculating correlations for the entire sample (from April 2013 to December 2019), between gold and bitcoin prices, the data showed that they were found to be significantly correlated at 46.5%, not correlated with 0%. , 100% meaning is completely positively correlated and -100% meaning is completely interrelated.
Interestingly, when comparing the price correlation between 2018 and 2019, it has been confirmed that the price correlation has increased from 60.3% in 2018 to 70.8% in 2019.
This scenario raises that as proven in crypto markets, price action is similar to traditional assets. The relationship between backward gold prices and bitcoin prices also shows similarity.
Last week, gold prices hit a record high of $ 1,606 an ounce and gold prices and volatility have also increased. At the same time, bitcoin had a racking up of $ 8,300, representing its highest price since November 2019.
In addition, on 8 January, bitcoin reached its highest daily transaction volume (over $ 28 billion), as the price dump occurred on 18 December. Given the volatility of bitcoin, provided by CoinMarketCap, one can see the January highs. 18 December to 8 and 3 January.
Specifically looking at price correlations, investors may be tempted to conclude that a relationship exists between gold and bitcoin. However, the data are not sufficient to reach that conclusion.
The correlation between returns is very weak compared to the prices of both assets with only 2.2% relationship for the study of absolute assets. However, the BTC and gold price correlation is showing an increase from 2018 (8.7%) to 2019 (12.5%).
The same improvement between 2018 and 2019 when looking at the lagged returns. But in that case, the correlation is negative in 2018, as well as the result for the full sample (-2.3%), but positive in 2019, which may prompt analysts to reject the offer that linked the return of gold to bitcoin behavior Has happened.
To see if the gold return describes how to transfer bitcoin’s returns by performing a regression model. When analyzing this sample of returns, the coefficients show that when gold rises by 1%, bitcoin rises by 0.115%.
However, these results are not statistically significant, which makes some analysts unable to confirm the small positive relationship. A negative relationship, even though not statistically significant, is also found to occur when bitcoin is returned against gold returns, which once again tells us that the price action of gold is in bitcoin. Does not predict.
Bitcoin has been compared to large-scale commodities, but some of its underlying assumptions – fixed supply and high volatility – are found, presenting challenges for that classification compared to oil.
Due to the recent conflict between the US and Iran, WTI oil prices rose 2.86% between January 2 and January 7, while Brent oil prices rose 3.9%. A similar behavior occurred in oil futures prices.
Taking a bird’s eye view of this scenario and using the sampling time period with gold, the data shows a negative relationship (-13.5%) between oil (WTI) and bitcoin price. Contrary to previous findings, the growth of correlations from 2018 to 2019 is negative – 22% in 2018 and -3.7% in 2019.
coins. In fact, Ether is almost always reversing these downtrends in Q1.
Potential breakout in the overall market cap eye after a retest
An important signal is the surge in the green zone by the total altcoin market capitalization. This level was the support zone before the big bull market in 2017. The level was also introduced as an endorsement in April 2019 before a significant surge of altcoins occurred and the ETH stopped at $ 360).
However, total altcoin capitalization needs to show strength and break the downtrend. If this happens, the total altcoin capitalization could see $ 80 and $ 125 billion as the next level.
A similar retest took place from November 2015 to January 2016, after all Shree Chakra was short. A retest was required to confirm support before Altup began to make its move.
Therefore, there are more arguments for potentially longer entries and possible bottom structures on altcoins rather than forward pressures. However, the crypto market is highly unpredictable, so one must tread carefully. If bitcoin decides to move towards $ 9,500, altcoins could possibly be crushed more against BTC pairs. Likes play the edges. But to play the trend of bullish and bearish, one must be aware of the positive and negative signals contained in various candlestick patterns.
To learn how candlesticks are interpreted, various technical analysis adds insight to the signal provided by the indicators and can take a digital asset.
Here are five more recession candlestick patterns that every trader should know.
Like the tweezer bottom, the tweezer top is a trend reversal pattern that indicates buyers are running out of steam and approaching an uptrend.
In this pattern, both candlesticks will have the same high and alternating colors with the left candle being green and continuing the uptrend and the following candle (red) showing weakness.
Many times, the actual body lengths of both candles are the same, but more confirmation occurs when the left (green) candlestick body is longer than the right candlestick.
When observing this pattern, traders usually decide to see if its occurrence coincides with a market high or a major resistance or trendline.
The Three Black Crows pattern is the inverse of the formation of the Three White Soldiers. The pattern indicates that a strong reversal is formed and recognized by three long-downing candlesticks.
As shown by the diagram, each day’s open is slightly higher than the previous close, but the price closes at a lower level each day. To confirm the pattern, the last two candlesticks must open within the actual body of the previous candlestick but less.
The Three Inside Down pattern can be found right at the top of an uptrend and indicates that one is in reverse order. The candlestick pattern refers to the first candle in the form of a long candle (green) that reaches the top of the uptrend. The following candle then dips the body in the middle of the first candle.
The third candlestick closes beneath the actual body of the first candlestick, confirming that the sellers have taken control of the asset’s price. Instead of waiting for the confirmation of the Three Inside Down pattern, many traders interpret the bar candle inside the medium (2D) candlestick as a sign of indecision and a signal that the price may be reversed.
Traders will also observe other indicators such as moving average convergence divergence (MACD), relative strength index (RSI) and exponential moving average to determine if the uptrend is approaching exhaustion.
The Bareish Advance Block often appears on the cryptocurrency price action chart and has a candlestick pattern that all traders should be familiar with.
In short, weakness in the pattern is indicated as the price rises steadily but the actual bodies of each candlestick become smaller and smaller, indicating a decrease in momentum and a growing mistrust of traders.
, It appears that buyers are in charge with each candlestick painting with a high high and a wick with a high price each day. But it is a sign to tell that the wick of each candlestick gets longer and longer, because the real objects become smaller. The distance between each daily close is also reduced.
The Bearish breakaway pattern is a short-term reversal signal that begins with a prolonged candlestick. The following candlestick up and down continuous intervals are observed through the third and fourth days.
For traders, the uptrend appears to gain momentum after the second day’s hiatus, but the lack of a third and fourth candlestick and a longer shadow on each candlestick suggest that the uptrend is losing steam.
The fifth (final) candlestick is a long-downturned candlestick that cleans the previous gain of the last three candlesticks and closes slightly above the gap between the first and second candles.