Bitcoin just had a seriously volatile weekend—what could possibly happen now to beat such performance for short-term traders?
In this week’s Monday markets report, Modern Consensus continues looking at the main issues at stake when it comes to forecasting Bitcoin price action.
Stocks give way to futures
Previous weeks were marked by macro volatility dictating Bitcoin price movements. The assets’ correlation is well documented, with Bitcoin and the S&P 500, for example, 95% correlated.
Both this week and last, however, the pattern of copycat moves was conspicuously broken. Bitcoin is gaining over stocks, which are by contrast much less volatile.
Exceptions have been clear—Tesla and last week Kodak both triggered wry reactions from Bitcoiners who have fielded years of criticism that the largest cryptocurrency is “too volatile” to be a genuine investment opportunity.
At the opening bell on Monday, however, talk was firmly focused on Bitcoin’s own ecosystem.
Bitcoin futures opened several hundred dollars lower than where they left off last week, with the resulting gap forming an easy short-term price target. Bitcoin has a historical tendency to rise—or fall—to fill a “gap” left in futures markets.
At present, there are two nearby gaps, and both are feasible market forces. A higher gap from this weekend lies between $11,450 and $11,600. Another from July is lower—between $9,660 and $9,930.
Analysts are currently using both as potential support and resistance, with the lower gap nonetheless meaning that Bitcoin could once again lose $10,000 support.
That would extend a problem which has plagued the market throughout 2020—five figures simply does not have the buy support to sustain beyond the short term. As Modern Consensus noted, however, this time would appear to be different to the rest.
“Just stack sats and thank Satoshi”
According to popular trader Josh Rager, even a sudden $1,200 dump on Sunday is no cause for concern.
“The latest Bitcoin pullback was only 15%,” he reassured Twitter followers after BTC/USD went from $12,000 to $10,850 in minutes.
“There were at least six pullbacks of 30%+ or more last bull market uptrend. Everything is going to be okay.”
Rager was referring to the ups and downs of Bitcoin bull markets. In 2019, when BTC/USD went from $4,000 to $14,000 in three months, multiple sudden corrections tried and failed to halt overall market momentum.
Comparing 2020’s renaissance to the bull runs of 2017 or 2019 is looking nonetheless increasingly difficult. The reason is context—this year, money printing and US dollar weakness form the backdrop to a completely different environment for Bitcoin.
A BTC bull run in a period of global financial uncertainty has yet to find historical precedent—Bitcoin’s birth came as a result of the 2008 Global Financial Crisis, the last such episode of worldwide economic upheaval.
For some steadfast supporters, however, current activity is just another brief episode on the way to astronomic highs which will obliterate even 2017’s fleeting $20,000.
“#Bitcoin’s increased millions of % points in 11 yrs,” RT host Max Keiser summarized on Sunday.
“No 5%, 10%, 15%, 20%, or even 50% (correction) means much of anything as we head to $100,000, then $400,000 as the new era of a Global Bitcoin Standard takes hold.”
Keiser’s advice to Twitter followers was thus simple: “JUST STACK SATS AND THANK SATOSHI.”
Gold underscores safe haven appetite
One product of the precarious global financial situation continues to both surprise investors and potentially fuel Bitcoin’s fortunes.
Gold, fresh from months of gains, is now challenging $2,000, already hitting all-time highs against the US dollar.
The pace of change has been intense—just a week ago, Citigroup analysts were only placing a 30% chance of XAU/USD reaching $2,000 by the end of 2020. At press time, the pair was already trading at $1,973.
For gold mogul and infamous Bitcoin skeptic Peter Schiff, the outlook based on US economic policy will continue to favor flights to safe havens. Last week’s speech from Jerome Powell, chairman of the Federal Reserve, said it all.
“Powell’s admission that he’s not even thinking about, thinking about, thinking about raising interest rates means there’s no possible scenario under which the Fed would raise rates,” he tweeted on Friday.
“No matter how low the dollar falls, or how high #gold or consumer prices rise, the Fed won’t act!”
Bitcoin still beats gold on both quarterly and year-to-date returns, which stand at 22.4% and 55.7% respectively. For gold, they are 11.5% and 29.6%.
