Will Gold to Bitcoin recover 300%
26 January 2021: Last weekend we discussed the peaks and troughs of Bitcoin since inception in 2010. The average maximum correction for the 4 major moves between 2011 and 2020 was 85% and that took an average of 209 days. We simply ask if a fifth major correction of this size cannot happen again?
Because Bitcoin is what it is, a value of trust for many or some, and really nothing else behind it, no one knows where or how this will end. From a technical point of view BTC is and also has to be more speculative. There are less fundamental parameters to consider which should typically provide a more solid risk analysis model. We believe that is true because this asset is a gem to trade based on a variety of trading tools if one has a large cushion to begin with. Our portfolio did not have that cushion and thus cannot be part of a wealth management risk approach.
The Gold bitcoin cross in the Tradingview chart below has moved from a high at 550.00 in late 2011 to a low of 0,0444 on 8 Jan 2021. The Gold BTC cross chart can be visually checked on Gaps. Breakaway gaps, Runaway gaps etc.
The difference with traditional markets like gold is that crypto is a 24/7 market and the chart below has weekends because of Gold. Those gaps naturally appear at the weekend whilst BTC continues to trade Saturdays and Sundays, sometimes with large volumes.
Yet, every single 'weekend gap' since 2010, up or down, has been filled until the latest runaway market that started in 2020. A full retracement cycle could take several months to a year or longer.
There are just 4 open down gaps left still. Historically, 98% of all sizeable gaps are filled at some point in future.
In descending order:
- December 25, 2020 Gap open from 0.0760 close
- December 11, 2020 Gap open from 0.1020 close
- October 9, 2020 Gap open from 0.1750 close
- April 24, 2020 Gap open from 0.2300 close
All gaps included an opening or high well below the close of the previous day.
Assuming Gold can logically benefit from a more serious retracement of crypto currencies in a Yellen, weaker dollar and inflationary economy, leaving out further major Covid-19 implications:
Gold $1850 / 0.0760 = BTC $23,342
Gold $1950 / 0.1020 = BTC $19,117
Gold $2200 / 0.1750 = BTC $12,570
Gold $2400 / 0.2300 = BTC $10,434
An 85% correction would bottom BTC at $6,300.
The Gold BTC cross is showing an extremely oversold condition in longer term time scales. If the push comes, no one can make the case that an above scenario cannot happen again. In spite of all the influencer narrative. We think it can and one should not take that kind of risk with only a small cushion of paper profit.