- Bitcoin has enjoyed an incredible run up in Q4 of 2020, emulating gold in many ways
- Both have broken all time highs this year, with gold correcting 15% since topping out
- Will Bitcoin follow gold in its correction, and what would that like?
What goes up must come down as the saying goes, and this, famously, applies to Bitcoin more than any other asset. The cryptocurrency has been on an absolute tear this year, following in the footsteps of gold, but with Bitcoin surely set for a correction will it follow gold in this manner too, and if so what would that mean for the cryptocurrency?
Bitcoin Mirroring Gold in 2020
We have commented before on Bitcoin’s similarity to gold in terms of how it has handled the change from a bear to a bull market, with the repeated tests followed by a sharp upward movement, breaking all time highs in the process:
It’s worth then seeing how gold has reacted since topping out after its record breaking run from $1,295 in January 2019 to $2,074 in August:
As we can see, gold has naturally dropped off since topping out, retracing 15% and dipping back under its prior all time high in the process. As of late November it seems to have bottomed out however, putting in higher highs to suggest that it is ready to start 2021 in a very strong position after its cooling off.
$20,000 Support/Resistance Flip Would be Bullish
Of course we can’t say for sure that Bitcoin will follow suit, but the gold’s digital cousin has followed gold in an eerily similar way in recent months, and it is due for a pullback following its own run past all-time highs. Given that we are then due a pullback, correcting back to $20,000 and using the prior resistance as support would not only be a natural and healthy correction of 16% (very close to gold’s 15%) but it would also see the prior resistance flipped as support:
Such a move would closely match what gold has done and would also allow for a decent alt season in the first few weeks of 2021, which typically happens after Bitcoin is correcting after a major move.
The only note of caution in such a move would be if Bitcoin to close under $20,000 on a daily timeframe. This would bring back into play the idea that it hasn’t left this key area behind after all, and could usher in a deeper correction with potentially damaging effects in the short-medium terms.