Flight to safe-haven, and price action growing erratic

20 oct 2023

In the previous idea about Bitcoin, we emphasized the need for quick action in regard to cutting a short position with a breakout above $28,000. By now, this should provide one’s cryptocurrency portfolio with protection from the volatile whipsaws and allow for a calm reassessment of the situation. Rising volatility and resumption of the weakness in the stock market caused the flight of capital to gold and Bitcoin in the past few days, though the fake news about the SEC approval of Bitcoin Spot ETF had a massive impact on Bitcoin’s price as well.

What’s really interesting about this whole sequence of events is that we highlighted a suspicious rise in the number of Bitcoin addresses with more than 100 BTC in the balance early on Monday. We also outlined similarities to previous situations in April 2023 and June 2023 when we saw very nearly identical activities among Bitcoin addresses (with medium-sized and large-sized addresses seemingly pushing the price aggressively higher in very short time intervals, and later, once the price reached a new high, unloading to retail). Only a few hours after publishing our article, fake news broke out, and we saw an abrupt jump in the price of Bitcoin and many other cryptocurrencies.

Many people called the recent events a run to safe-haven assets (which we arguably can identify Bitcoin as well in certain situations; for example, like in March 2023, when the implosion of regional banks caused commercial deposit outflows and subsequent rise in the price of crypto). That would be yet another sign of Bitcoin slowly maturing as the asset class it was designed to be. However, as positive as that is, we want to remind our audience that this “run to safe-haven” behavior was also observable in gold at the end of 2021, after the market started to fall. But then, at some point, this safe-haven function turned into selling gold for profit to cover losses elsewhere. We think there is a high chance we will see the same thing if the stock market continues to sell off and severe panic sets in. As a result, we consider it proper to wait a bit longer before taking action.

Illustration 1.01

The picture above displays the daily chart of BTC.D (Bitcoin’s dominance).

Illustration 1.02

Illustration 1.02 shows the safe-haven behavior of gold relative to the performance of SPX in late 2021 and 2022.

Technical analysis gauge
Daily time frame = Bullish
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

20 oct 2023

Nota

An aggressive bearish setup would involve taking a short position if the price bounces off the upper bound of the upward-sloping channel (or after the price breaks above it and then falls back below it) and placing a tight stop-loss above it.