Bitcoin, gold and other assets had been rather quiet in the months following the March sell-off. That was after the novel coronavirus came through, sending a ripple through all sorts of markets.
The economy — both globally and here in the U.S. — saw major disruptions. Oil futures went negative at one point, while Treasuries swooned, and gold and bitcoin prices tanked.
Despite record amounts of stimulus, again domestically and abroad, gold did well but it didn’t explode higher. Now though, the precious metals — including palladium and silver — are jumping.
Bitcoin apparently got the memo and joined the parade. The cryptocurrency is up more than 21% in the past eight trading sessions. It’s up a similar amount over the past month. In comparison, silver is up 35% over the past month, while gold is up about 10%.
Is this just the start?
In reviewing the one-year daily chart, the most glaring chunk of price action is the fall from $10,500 to $3,850 earlier this year. That 63% stumble was almost double the fall we saw in the S&P 500 and far worse than the 15% decline in gold.
That said, the rebound has been impressive. Earlier this month, I was looking for a breakout in bitcoin. It was bobbing along $9,000 but had broken out over downtrend resistance (blue line). The cryptocurrency also reclaimed its 20-day and 50-day moving averages.
At that point, traders had a solid risk/reward in bitcoin, particularly with upside targets of $10,000 and $10,500. The former had been resistance and remains psychologically relevant, while the latter comes into play near the 2020 high.
I wrote that, “above $10,000 and stiff resistance between $10,350 and $10,500 is possible, before an even larger breakout could begin.” Bitcoin is over $11,000 currently and is working on that larger breakout.
From here, I now want to see that prior resistance zone between $10,350 and $10,500 act as support. If that’s the case, it will be another bullish development. Below $10,500 puts $10,000 back in play. If that fails as support, the setup loses virtually all momentum.
On the upside, let’s see if the cryptocurrency can take out Monday’s high at $11,417. Above this mark puts the 123.6% extension in play at $12,070. Just above is the current 52-week high from Aug. 6 at $12,325 — although that mark will not last long as 52-week high, as we approach that date now.
Over this mark puts the 138.2% extension in play at $13,041.
Paul Tudor Jones is a legendary Wall Street vet. A few months ago, he said he was looking for the “fastest horse” when looking to place his inflation bet. That horse, he determined, was bitcoin.
He said that it reminded him of the gold trade from the 1970s and believes that the cryptocurrency will do well as an inflation hedge. Whether it’s gold, bitcoin or something else, what is the motivation?
For some, they may see bitcoin as the way of the future. It might be and that’s a possible catalyst. Currently though, others are looking at it as a play on money-printing. With central banks around the world pumping stimulus into the system, non-paper assets are flying.
“It has happened globally with such speed that even a market veteran like myself was left speechless…We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money unlike anything the developed world has ever seen.”