BTC dropped yesterday to enter back into the territory of the bearish flag. The RSI too is looking like it is going to break the lower bound of its upward trending channel. I was expecting a bounce from the yellow line that forms the upper bound of the bearish flag. If I redraw the lines the situation looks like this -
This clearly shows BTC as being range-bound between $30k and $40k. $30k is weak support. The situation is neutral and one should watch the charts for a clear break out in either direction before taking positions.
The dollar rose sharply last week following FED remarks of a possible rate hike 2 years from now. The daily chart is showing the formation of a head and shoulder pattern bottom -
If this H&S pattern is confirmed, then the dollar will rise sharply blowing away all inflation expectations along its way to higher levels. This has broader implications for your investments. Inflation stays low, growth expectations subside, more QE, more fiscal -> bullish bitcoin definitely, bullish gold perhaps.
This is the trickiest asset class.
- Dollar goes up - gold crashes since it acts like currency.
- Dollar goes down - inflation expectations rise - rates move up - real rates move towards positive - gold goes down since it's negatively correlated to real rates.
- Economic activity comes to a halt - traders get margin calls - gold goes down as traders sell it to raise cash
- Inflation expectation rise - fed remains dovish - gold up! Because it is an inflation hedge? Because real rates are going more negative? Because Peter Schiff shilling hard?
Technically, the gold chart is showing a bull flag. If higher QE, more fiscal stimulus scenario plays out - then it will be good for gold too I think.