Bitcoin (BTC) has been following Gold for the most part since 2018. The correlation is not very clear before then but recently Bitcoin (BTC) has been acting a lot like digital gold, but the question is “Could Bitcoin (BTC) be Digital Gold or is all of this staged?” First of all, let me say that a lot of people have been trying really hard to portray Bitcoin (BTC) as Digital Gold but investors have yet to buy this narrative. That being said, when you ‘stage’ a correlation too often, it is easy to convince investors that that might be the case maybe not immediately but eventually. After January 22, 2018, when Gold (XAU/USD) started to decline, Bitcoin (BTC) soon followed in the weeks. Both continued to decline for the most part between January and November of 2018.
In November, 2018 Gold started to rally and Bitcoin followed after it formed a temporary bottom. It is pertinent to note that there was a lot of indecision at first which is why we saw Gold rally while Bitcoin (BTC) was planning its next move. Gold rallied and topped out and Bitcoin (BTC) did the same. At this point, both Gold and Bitcoin (BTC) are long overdue for a correction. For Bitcoin (BTC) this would mean a decline below $3,000 and for Gold it would mean a decline to mid $1,300s. It is also important to realize that Bitcoin (BTC) could have a more devastating correction and for all we know decline to a three digit price before the bear trend comes to an end. What we need to realize here is that this correlation between Gold and Bitcoin (BTC) is staged. This is not real, just like 90% of the trading volume on some of the most popular exchanges is not real.
The first bear trend that we see on the BTC/USD chart from $20k to $3k was about shaking out the dumb money. It was about dumping on the retail traders with no knowledge or experience of the markets that had bought near the top out of FOMO. This time however, it is about the smart dumb money. This means ‘digital hedge funds’ and amateur institutional investors who look at BTC/USD with their one hundred indicators and then decide to buy expecting the price to shoot towards $50,000 from here.
Most of them already think the bear market is over and the market makers want them to believe that which is why they paint them correlations to Gold and parabolic advances that violate bearish patterns making them believe that there is so much buying interest in the market that this may be the last time to buy at a four digit price. Most of them are already in and have too much skin in the game. They keep coming with their “Bitcoin is digital gold” statements everyday but if we really think about it, are people really going to want to be holding something as risky as Bitcoin (BTC) at the time of a crisis? Maybe in the future it could be a safe haven asset or it could be a temporary distraction from the big play in Gold. Time will tell.