Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Bitcoin Price Flashes Important Signal

Currencies / Bitcoin Aug 03, 2016 - 05:50 PM GMT

By: Mike_McAra

Currencies

In short: short speculative positions; stop-loss at $657; initial target at $527.

Does Bitcoin correlate to gold? This is the kind of question Bitcoin enthusiasts pose to themselves. As it turns out, the question might be surprising to a lot of people who claim that the two are very similar. In an article on CoinDesk, we read:

An analysis of historical market data conducted by ARK Invest's Chris Burniske failed to illustrate a strong relationship between the two.

Burniske's analysis revealed that when examined on a weekly basis, the one-year rolling correlation of bitcoin and gold's returns was positive for nearly the entire period between 30th December, 2011, and 20th June, 2014.


However, this correlation averaged 0.14 during the period, pointing to a rather weak relationship.

While a correlation coefficient of 1 would indicate their returns followed each other perfectly, a correlation of zero would indicate there was no relationship at all. Since the figure of 0.14 is rather close to zero, it points to a very flimsy relationship between the returns of gold and bitcoin.

On 27th June, 2014, the rolling one-year correlation between bitcoin and gold became negative, staying that way for almost the entire period between then and 24th June, 2016.

The correlation averaged -0.20 during this time, once again failing to illustrate a strong relationship between the two.

The results are generally not changed by switching to weekly or monthly data, in the sense that the correlation between the two was not significant, no matter which kind of data you choose. Also, the sign of the correlation changes depending on what time window we look at or what kind of data we use. This means that the relationship between gold and Bitcoin can change from one where gold and Bitcoin tend to move in the same direction to one where they move in opposite directions. This, in turn, suggests that the relationship between the yellow metal and the digital asset is not necessarily a stable one.

The article mentions that the correlation tends to go up in times of crisis, however, this doesn’t seem to be particularly useful as the correlations between asset classes in general tend to spike in such times. The trend doesn’t have to do anything with Bitcoin or gold – it might be a reflection of panic in the market and traders selling out of their positions and moving to cash or instruments perceived as cash.

For now, let’s focus on the charts.

On BitStamp, we finally saw a day of decisive action yesterday. Bitcoin moved visibly below $650. Is this the move we’ve been waiting for? Recall our recent comments:

The general idea hasn’t changed much. Bitcoin is still at $650, which might be an important level (...). One possibly significant bullish hint is that Bitcoin didn’t decline following the announcement of the halving of mining rewards. This might be a show of strength. The recent volume, however, has on the downside, which suggests that Bitcoin is yet to move a significant move in either direction from $650.

The delicate move down made the situation slightly more bearish, nullifying some of the previous upswing. The general picture remains. Bitcoin is in a bearish position but not quite bearish enough to go short just now. A breakdown below the 61.8% Fibonacci retracement level could be a trigger here.

Bitcoin is now above $650 but not much has changed. We still have room for declines but there is no indication that the move has already started. This might change in a matter of days, as even one day of strong action below the Fibonacci retracement might serve as a bearish confirmation.

We see that this is still unfolding and that the downside potential is still there. The fact that Bitcoin hasn’t moved yet might have to do with the fact that the currency is still above $650. If we see a move below that level, and it holds, this might be the trigger we’re waiting for.

And we actually saw a move below $650. Not only that, but also the currency might be moving below its recent trend based on the May-June rally and the late post-rally local bottom. As far as the move below $650 is concerned, we have only seen one daily close below this level (possibly two if we count today) but based on the magnitude of the move, we might view the slip down as confirmed.

On the long-term BTC-e chart, the beginning of the next move down might actually be visible. Bitcoin is below $650 and might be moving below the recent uptrend. Our previous comments:

The 38.2% Fibonacci retracement level is still very much in play. We haven’t seen a move below this level just yet. At the same time, we haven’t seen a move above the $700 level which might be the next important level on the upside. As such, the situation still has a bearish tilt in our opinion, but it’s not enough to go short just now.

The last couple of days actually look like a possible local top. We might see a sort of triple top with each consecutive top being lower than the previous one. This would be a bearish indication. The level at which the move might accelerate is still around $650. A move below this level might be an indication that a stronger decline would follow. This is not the case yet.

(...) The current reading of the RSI is at around 50 which indicates that there still is room for declines going forward. The level to observe is still $650 as it coincides with the Fibonacci retracement and it might be a point at which the decline accelerates, in our opinion. We haven’t seen this just now.

The situation changed yesterday with the depreciation. Not only did Bitcoin go below $650 but it also closed visibly below the 38.2% Fibonacci retracement level. The situation now is a lot more bearish than it was only a couple of days before. At the same time, we still have some room for declines based on the RSI. If we don’t see a strong move above the broken 38.2% level, the situation might remain bearish.

Summing up, in our opinion short speculative positions might be favorable at the moment.

Trading position (short-term, our opinion): short positions; stop-loss at $657; initial target at $527.

Regards,

Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts at SunshineProfits.com

Disclaimer

All essays, research and information found above represent analyses and opinions of Mike McAra and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mike McAra and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. McAra is not a Registered Securities Advisor. By reading Mike McAra’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Mike McAra, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Mike McAra Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules