Bitcoin is down nearly 9 percent after hitting its new record high of $ 20,000 last week. A team of quantitative strategists at JP Morgan & Chase believe gold is behind the corrective price movement of the flagship cryptocurrency.
The analysts, including Nikolas Panigirtzoglou, wrote that Bitcoin price correction is lagging behind on a similar step on the gold market. When the precious metal peaked in August 2020, it prompted investors to hedge short-term gains and reinvest the gains in Bitcoin. This explains why the cryptocurrency boomed around 100 percent while the metal fell 11.50 percent after August.
Bitcoin rallied by almost 400 percent since March 2020. Source: BTCUSD on TradingView.com
Now an inverse fractal is in progress. Bitcoin prices have been exceeded and therefore expect a downward correction to neutralize the momentum signals. Meanwhile, gold is trading near an upside down support level of $ 1,764 and anticipates a rebound.
“For Bitcoin,” said the strategists, “momentum signals have deteriorated, which will likely lead to investors trading on price trends selling.”
Bitcoin whale sniffing
According to recent reports, Bitcoin’s long-term holders – technically those who have held the cryptocurrency for more than 166 days in a row – made their profits before hitting an all-time high.
Robbie Liu, Investment Analyst at OKEx Cryptocurrency Exchange, said in a Friday note Retailers seemed unsure of whether to take new long positions in the $ 19,500-20,000 range, which allowed the big players to overtake as sellers.
“Ultimately, we will likely see a battle between whales and retailers as Bitcoin tries to test the key psychological level of $ 20,000.”
Peter Schiff, the executive director of Euro Pacific Capital – a California-based wealth management firm – also noted that “long-term bitcoin bulls” preferred to sell their profits to get exposure to competing assets like gold.
– Peter Schiff (@PeterSchiff) December 7, 2020
JPMorgan analysts said Bitcoin should maintain its bullish bias over the long term as more investors choose to mix their capital from gold markets. The bank noted that money has been pouring into the BTC market at the expense of the precious metal since October.
“The introduction of Bitcoin by institutional investors has only just begun, while the introduction of Bitcoin by institutional investors is very advanced,” the analysts write.
They pitted the listed Grayscale Bitcoin Trust against exchange-traded funds that were backed with gold. The former has seen $ 2 million in inflows since October while the latter received $ 7 billion.