Bear Trap: Will Bitcoin mimic gold by claiming a long-term trend line?
Bitcoin and gold have been side by side for almost two years, as the global economy gets closer to total collapse.
If the correlation continues, the latest drop in Bitcoin will be nothing more than a bear trap designed to shake up investors before the asset claims a long-term trend line and continues its climb towards new all-time highs.
The correlation continues between the first cryptocurrency and the precious metal
The discussion about whether Bitcoin really is a safe haven asset like gold and other precious metals continues, as the two assets have shown a strange correlation in the past.
The correlation first advanced after Bitcoin’s peak in 2017, but comparative price action actually increased in early 2019, when a trade war between China and the United States began to brew.
In early 2019, both assets started a new bull run and spent the next few months recovering. They both experienced a pullback in mid-2019, but then began to recover in late year and early 2020.
In early 2020, both assets began to skyrocket as fears of a possible pandemic began to grow.
These fears eventually came true and the panic spread to the financial markets. The result was a record drop in the major stock indices, gold and Bitcoin. Some assets, such as silver, had more than a decade of growth in hours.
But now both assets are recovering once again and are ready to prove their worth as safe assets in the face of the next economic crisis.
Will Bitcoin continue to follow gold with a Bear Trap Shakeout?
On the way up, gold broke from a long-term trend line. During the recent collapse across all markets, Bitcoin also lost its long-term trend line.
The breakout of gold below the long-term trend line was a bear trap designed to shake up investors and force them to buy higher again, further boosting the asset price.
The same breakdown of a long-term trend line has just occurred in the Bitcoin markets, and the price action and signals in the relative strength index appear to be eerily similar to those of gold when the bear trap occurred.
The combination of the two assets that have been precisely combined for some time, and the fact that both the price action and the indicators are very similar, gives the theory additional credibility.
However, it is worth noting that the time scales are drastically different between the two assets, so the comparative analysis must be taken with a grain of salt. But given how closely the two assets have been correlated, a bear trap in Bitcoin is quite possible.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.