Is Gold Leading Bitcoin or Are They Alternative Assets?

In 2018, there was a widespread assumption that bitcoin was the new gold. The premise was based on the idea that bitcoin was the young man's gold. A way to get away from fiat currency without the hassle of buying and storing a precious metal. At the time, bitcoin was trading near $20,000 per coin and gold was out of favor and struggling to hold value above $1,200 per ounce. Ironically, at the height of the bitcoin vs. gold discussion, both markets reversed their trends. Gold spent the following year and a half rallying and bitcoin dribbled lower. Will we get a repeat? In 2018, bitcoin was an asset few had access to, and few knew little about. It was simply known as the place young techies were striking it rich. Even more interesting, at the heyday of bitcoin in late 2018 the asset was only available in obscure trading wallets and most brokerages prevented clients from selling it, they could only buy it. This is obviously an obstacle to price discovery. Once the futures exchanges listed bitcoin contracts in December 2018 the value dropped immediately and dramatically because suddenly there was a market to sell bitcoin. Since then, retail traders have been granted various ways to participate in bitcoin including ETFs such as . While bitcoin is still a market that people prefer talking about rather than trading in (futures volume is dismal, ETFs are expensive and inefficient, and cryptocurrency brokerages/wallets offer little money protection), the bitcoin gains forged in 2020 are more legitimate than they were in 2018. Further, the relationship between gold and bitcoin has had some time to develop. During the short time we have had to observe how gold and bitcoin can coexist, we have noticed gold futures tend to lead bitcoin. Specifically, despite the recent negative correlation, the two assets have moved in the same direction most of the time with gold posting significant lows and highs that are later followed by bitcoin. If this pattern continues, the August high posted in gold could be a precursor to a similar reversal in bitcoin. That said, we wouldn't recommend bitcoin speculation; the margin requirement for bitcoin futures is a whopping $35,000 based on a contract valued at roughly $100,000 (or five bitcoin). Source: QST Those that have been following our commentary might be aware of our longer-term bearish bias in precious metals. In fact, maybe some of you were compelled to send mean tweets and emails criticizing our view that gold and silver might not go up forever. We chose to take a bearish stance after gold and silver had met our upside targets based on the monthly charts of gold and silver. Thus far, the chart seems to have been truthful. With our bearish metals bias in the forefront, we admit the metals market won't go straight down. There will be plenty of switchback trading, volatility, and confusion. Source: QST The markets tend to be excessively volatile and unpredictable throughout the holiday season. Thus, we encourage gold bulls to be cautious in any attempt to buy the dip. If support near $1,800 per ounce fails, the next stopping point would likely be $1,700 and could be seen in short order. However, if seen in early-to-mid-December (the typical seasonal low in gold) it might be a place for the bulls to dig their heels in for a temporary rally.

Is Gold Leading Bitcoin or Are They Alternative Assets?

Bitcoin is still a market people prefer talking about rather than trading in, but the gains in 2020 are more legitimate than those in 2018.

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