Gold Sinks as Bitcoin Price Nears Record High
updated on:24 Nov 2020
In times of crisis, it seems like Bitcoin is better at being gold than, errr, gold.
It seems that economic crises are the fuel that feeds Bitcoin's engines. While 2020 was a catastrophic year for the global economy, BTC has managed to recover almost all the value it lost in 2018 after an extended bearish correction.
This trend has intensified in recent days, as markets stay optimistic after Trump's defeat and the rollout of a COVID-19 vaccine gets closer. Bitcoin has been outperforming traditional investments, including gold, considered the store of value par excellence in the world of international finance.
Gold is coming down to earth
The past few weeks' events have made gold less attractive as investors begin to buy shares in businesses that may soon recover from the global economic downturn—such as pharmaceutical or logistics companies. And the charts show it.
Gold has been correcting downwards since August, maintaining strong support near $1,835. Lower and lower spikes are a warning signal for hodlers. The metal stopped being overbought and is moving toward a more balanced ratio between buyers and sellers.But this week started off ugly for the precious metal with a drop of nearly $45 between its daily high and its current price. Short-term traders should beware of a possible bearish breakout, as its current price of $1,838 an ounce is dangerously close to the support.
Bitcoin wants to moon again
Bitcoin traders seem to have had enough of the 2018 crash and want to relive the past glories of 2017. The world’s leading cryptocurrency by market cap has been in a stable upward trend since the coronavirus-induced market crash in March 2020.
However, after a bearish September, news of major institutional investors catapulted Bitcoin to new highs. In particular, three events appear to have been crucial for moving Bitcoin from just rising to mooning: Square's purchase of $50 million in BTC, Joe Biden's presidential election victory, and PayPal's support for crypto operations.Around the time of these three events, the bullish channel became much steeper—almost resembling 2017—resulting in Bitcoin becoming heavily overbought. Literally. A recent report revealed that PayPal and Square were causing a kind of shortage in the markets by buying more than 100% of all newly mined Bitcoin.
If Bitcoin remains in this new channel, it could reach a new all-time-high before 2020 ends.
And as institutional investment increases, many see this as a critical factor in differentiating 2017 from 2020. Bitcoin is no longer a novelty created by a group of geeks. Instead, it is now seen as a legitimate asset making its way into the financial marketplace.
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