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Jul 29, 2020

Bitcoin and gold flying together show that it is a safe-haven asset? What is the linkage between the two?

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Bitcoin hits a new high this year

After a short break with $10,200 yesterday, BTC began its heavy upswing today. Before yesterday’s strong trend, the important resistance level did not bring too much difficulty to the price increase, and the breakthrough of 10,500 US dollars did not significantly increase the volume directly to 11,000 US dollars. The price entered a consolidation downward trend after being blocked at $11,300. On the whole, today the market’s funds have begun to flow into mainstream currencies, especially BTC, and the previously popular ETH and Defi currencies performed flat. Judging from the growth rate, the funds for opening a position of $9,100 have already left obvious short-term gains this morning, and the currency price will inevitably enter a step-back adjustment. You can pay attention to the support near the solid top of the big Yang line at $10,700. Before today, the hot gold and silver market has also entered a downward trend. Investors should be careful of short-term large fluctuations.

(Bitcoin transaction data in the past year is provided by C2CX exchange )

ETH rose late yesterday. After the closing of the Yang line for a week last week, the trend is weak today. You can see the short-term profitable funds begin to withdraw. You can observe the short-term support of $307 and $300.

The structure of the contract market still maintains a continuous upward trend yesterday. The contract’s open interest is close to the new high this year, and the trading volume has also begun to enter a state of rapid increase. The premium of the quarterly contract reached 20% after annualization and reached the highest level after 312. The market may enter a state of anxiety in the short term, and investors can pay attention to whether there are a large number of short positions to open.

USDT’s quotation on the OTC market of Huobi Global is 6.96, a slight increase from yesterday.

Expert observation

On July 28, the price of gold futures soared to hit $2,000 per ounce, and the price of silver/dollar also rose explosively last week. At the same time, Bitcoin seems to have gotten rid of the triangle that has plagued it for a long time, heralding the beginning of a new bull market, but it is unknown whether this round will hit a new historical price high.

Compared with the relatively stable trend of gold, the price of Bitcoin fluctuated more drastically during the same period. Although people are paying attention to the price of Bitcoin, Bitcoin believers are more concerned about whether Bitcoin can function well without intervention, and whether Bitcoin can survive and continue to be used. In fact, while the traditional financial system is struggling with record-setting bailouts, stimulus, and capital injection policies, Bitcoin is trading uninterruptedly, even if there are sometimes fluctuations in price. Unlike gold, which acts as an “economic crisis hedging tool”, Bitcoin is more like a “currency crisis hedging tool”, that is, when the sovereign currency encounters a crisis-that is, when people do not trust the legal tender system, it acts as a hedging tool. The purpose of the Federal Reserve’s plan to purchase government bonds and expand the repurchase market is to control the money market. In this case, Bitcoin will eventually become a hedge of choice for investors or at least an alternative to hedging.

This year the Federal Reserve implemented a “crazy” quantitative easing monetary policy, which has caused many stock prices to hit record highs. This trick has been proven effective in preventing economic collapse. But the global economy still seems to be in a cold state, and the proliferation of dollars will undoubtedly create a hyperinflationary environment. Gold is one of the few assets that continue to shine in the dark. Whenever the economy is in trouble, investors will transfer funds to gold to protect themselves from losses.

Bitcoin currently does not show an inevitable linkage with real-world assets. Previously, it was occasionally linked with stocks and sometimes linked with gold, but there was no inevitable logic. In fact, in the traditional financial world, the reverse relationship between gold and the US dollar is not inevitable, so the linkage between phenomena is actually not objective. It is worth noting that Bitcoin does not form an inevitable linkage with real-world assets, indicating that its market logic is diversified, and its asset attributes will have different characteristics in different periods.

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