Bitcoin/crypto enthusiasts advocate (paraphrasing with broad strokes) bitcoin as the evolution of currency from decentralized gold, to centralized fiat, and now decentralized blockchain. The charts we are going to look at are going to suggest
1) Bitcoins chart for 20014 to today looks a lot like gold between 2008 to 2013 2) Bitcions current price action don’t resemble a fiat alternative such as precious metals
From 2008 to mid-September gold was in a very curious inverted head and shoulders consolidation as a continuation pattern, not a bottom reversal. From late 2013 to March was in a fundamental saucer consolidation and continuation pattern. This chart is a log weekly chart, if you look at it on the arithmetic scale you can easily see the falling wedge. Both of these reversals have the price action finding support on the 200 EMA before finishing off a parabolic move.
Next from 2011 to April 2013 Gold entered into a Descending Triangle Reversal as a top which performed beautifully (or horribly, depending on your point of view) until the 100 and 200 EMA acting as resistance, not support. It wasn’t until the price action returned to the 600w EMA/top of the long term continuation pattern that we entered accumulation phase.
This accumulation pattern, retrospectively looks easy to trade for people with a solid moving average trading system. BTCUSD lacks the same history and so I am personally looking for the co-incidence of the Gold 600w EMA and the return to the long term continuation level (or just a bit above it). The market cap of gold, in 2017 valuation is 7.5T (en.m.wikipedia.org/wiki/Gold_reserve). Crypto is less than 200B. Gold has exited the a period of accumulation and so the moves over the last week, with the deep and liquid markets are significant. If crypto had the acceptance of a fiat alternative it would not be in a topping/reversal pattern right now.. The price action does not suggest people are using it as a save haven, or a store of value in light of the current financial woes.
Below is an interesting chart. I have mentioned etfhq.com, a website that sought to optimize indicator settings, several times before. Here we see the optimized short settings with a small changes from me. I split the MACD from its histogram for ease of charting divergences and I put Bollinger bands on the MACD signal. The Signal line has a habit of pulling away from the extreme of the Bollinger band before reversals, and a break of the BB midline is a powerful signal of transition of the market, either from bull to bear or vice versa. The Signal is pulling away from the outliner of the Bollinger band, the RSI looks like hell, and the MACD histogram is signaling losses will begin shortly. The price action has a descending triangle topping this uptrend with a target below 5k.
And speaking of divergences, the Money Flow Indicator and the OnBalance Volume EMAs suggest this is a bull trap. I’ll be paying attention to see if the 10 and 20 OBV EMAs cross, just like I will the Money Flow Indicator 15 and 50 period averages. And I am quit surprised myself that my ascending triangle target from the above chart is right to the bottom of the Double Cloud.
Conclusion I am not a financial adviser and even if I was, I am not your financial adviser. But right now my personal plan is to use the portion of my portfolio that is involved in crypto for shorting bitcoin and the portion that is for precious metals for longing UGLD and USLV, the silver and gold x3 ETFs. My equities allotment are going to be in FINZ and SPXU, the -3x short of the financial sector and S&P as a whole. When BTCUSD hits the long term consolidation level I’ll look at accumulating like a good composite operator.
To the bitcoin faithful this simularity between the price action of crypto and gold does add some credence to the idea that bitcoin is digital gold. But since gold and silver are moving powerfully out of accumulation with their trillion dolar market caps and BTC is setting a lower high its clear that it isn't a fiat alternative... yet.
Gold has been impacted by Basel III, that’s why it’s acting differently than Bitcoin. But bitcoin has a lot of similarities in its supply and cost of production. The largest difference is the regulatory environment; once institutions can carry crypto on the balance sheet, bonkers it will be.
fangio10
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@FerroIgnique, crypto is far to small a market for any serious investment without dramatically moving price... the market is simply too small, there will be no instant rush into crypto from institutions, it is not viable
This_Guhy
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@fangio10, I mentioned in my BAKKt battle plan post the chances for arbitrage between futures and crypto make it more likely the big money is going be in crypto, but on the short side. This also completes the hyerwave theory.
FerdiHodler
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I cannot understand how to interpret of a "hidden bearish divergence" in a cumulative volume indicator like the OBV
This_Guhy
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@bionicol, divergence, no matter what kind of indicator you are using, range bound or cumulative, is just a sign of exhaustion or that a move is weakening. The OBV EMAs set a higher high while the price action set a lower low. Since the highs are not congruent we know the bulls have exhausted themselves here and could not set a higher high. This means we should expect a potential lower low with higher probability than if there was no divergence.
In this case it helps signal/suggest we are in a beautiful bull trap. If you are an Elliot wave trader the low at 3k to our high right here was Wave B and we are looking for wave C to take us below 3k.
sinicson
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you are ignoring these assets fundamentals here, you can't compare these because both are limited supply and have similar charts shape over different periods of time. This is huge stretch.
This_Guhy
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@sinicson, I am focusing on the use case of Crypto as a fiat alternative while gold is fiats predecessor that continues to show its strength as a fiat alternative. And these are technical moves and technical analysis. I am just saying the level were resistance is going to be tested as support for bitcoin is way lower than most people expect. 1200-1400 depending on exchange.
>you are ignoring these assets fundamentals here,
No I am not. You use fundamental analysis to decide what to buy/trade/invest in. You use technical analysis to find you buy or short entries. This is a post on trading bitcoin by using gold's history.
>you can't compare these because both are limited supply and have similar charts shape over different periods of time.
.... yes I can. I can compare something advertised as digital gold to actual gold.
real-crypto
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@sinicson, So in your rebuttal, you state that he can't analyze these things against each other because they are the same?
sinicson
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@real-crypto, @This_Guhy, my point is BTC is in pre early adoption stage, hence it acts as uncorrelated asset. It will (I believe) eventually catch up and follow gold but its going to take time, until then expect weird behaviors... e.g. FED lower rates, Gold goes up, BTC goes down... etc.
This_Guhy
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@sinicson, I think as time goes on bitcoin and gold will develop a negative correlation or at the very least we will find them easy to trade against one another. If you look at gold and silver long term these are set to hit new highs in the near future on Basel III incentives to central banks, the role of silver as a commodity and gold as a save haven and btcusd is looking at continuing downward. There will be a time where the gold/btc chart and the silver/bitcoin (against USD, of course) signal a massive pivot out of precious metals into gold.
I expect in short order people will be looking at the bitcion/gold ratio as they look at gold/silver when they want to do some major re-balancing of their portfolio. I know I am now as I pivot into precious metals and away from equities and crypto.