Hey hey Vaultorians, welcome to another weekly analysis on bitcoin and gold!
BTC/USD – Bitcoin Falls on Bad News From Bitfinex
Bitcoin is now trading at $5,175 after hitting highs around $5,600 earlier in the week.
Several weeks of bullish price action have given way to a pull back, which is fueled by both technical and fundamental factors.
Bitfinex, one of the biggest crypto exchanges, has been accused of fraud. The exchange is alleged to have lost $850 million, and used funds from affiliated stablecoin operator Tether to cover the shortfall. This has sent a wave of FUD through the market, as traders on the platform withdraw their assets rather than face an uncertain future.
Technically, this pullback was also preceded by a bearish RSI divergence on the daily chart, which suggests more downside could be on the way.
This comes despite the completion of a golden crossover, where the 50-day moving average (orange) has now crossed the 200-day moving average (blue), suggesting that we are entering a long-term bull market.
If we revisit historic charts from 2015, however, at the end of the previous bear market, we can see that the golden cross that formed on the chart was followed by a death cross — marking a final shakeout before the bull market actually got under way. Should this happen again, and the pullback now move below $5,000, then we are likely to see more downside for bitcoin, which would technically still be bullish down to around $4,200.
If we move up, then it won’t take much for bulls to once again get enthusiastic and start piling into the market, especially if we can break back above $5,400.
XAU/USD – Gold Gains Capped by Strong Dollar
Gold’s recent downtrend has come to an abrupt halt, and the yellow metal is now trading at $1,280.
On Tuesday, a local bottom was formed around $1,267, with long-wicked candles suggesting that each new low was being quickly bought into. This is a bad sign for bears, and suggests that the head and shoulders formation highlighted in last week’s update has now been invalidated.
But despite the strong bottom, upside is limited by an equally strong dollar. The Dollar Index (DXY) hit a yearly high above 98.3 on Thursday after stronger than expected US home sales boosted confidence in the US economy.
Even though gold has a strong inverse correlation with the dollar, these gains are not weighing too heavily on the metal, which could be due to increased safe haven appeal from tensions between the US and Iran, and poor economic data from stock markets around the world including Germany and South Korea.
Looking ahead, gold is now clearly at an inflection point, but remains bullish as long as it can hold above $1,280.
Any move lower is likely to find support at $1,267, a level which if broken, is very likely to lead to further downside.
Disclaimer: This content is for educational purposes only and does not constitute financial advice. It is very important to do your own analysis before trading or investing.