Could Bitcoin Movements Point to Small Gold Stocks Falling?

Could Bitcoin Movements Point to Small Gold Stocks Falling?

While comparing gold and bitcoin gives an idea of ​​the patterns in the market, can the slippage of small miners be predicted in the same way?

Those of you who have been following my analyzes for a while might expect me to write that it is based on the stock market rally and is therefore only temporary, as gold miners will follow sooner rather than later. This is their ultimate (current or expected) source of income. While this is true, there is now another huge factor that is likely contributing to the situation.

A cryptic drama is likely to unfold.

Remember when I commented earlier on the link between mint and cryptocurrency? What I wrote at the time was especially important in connection with the lesser-known (obscure?) shaded background. In fact, some call them “shitcoins”.

I wrote that for several individual investors, Cryptocurrency has become the “new precious metals market.”

Alternative payment system? Just like gold, right?

There is a major asset (gold, bitcoin).

There is a less expensive but obviously more useful asset (silver, Ethereum).

There are a number of little-known assets that are considered risky but have the potential to provide huge returns (high-quality mining stocks, low-quality mining stocks, especially low-quality junior miner stocks, altcoins, and “shitcoins”). While gold hasn’t been doing much, wild rallies in cryptocurrency have gotten a lot more attention. This was finally exciting!

Therefore, retail investors have flocked from the precious metals market to cryptocurrencies. Not all investors, of course, but many are.

While cryptocurrencies were on the rise and general sentiment was positive, investors dumped their PM holdings to buy cryptocurrencies as they predicted that the latter would continue to rise “to the moon.” And while gold didn’t matter much, since the yellow metal has strong buyers and sellers who aren’t interested in cryptocurrencies, it did matter a lot to the junior mining stocks sector as purchasing power waned.

Fast forward to the current situation, every day we hear or read about another crypto scandal, while cryptocurrency prices are dropping sharply.

This means that the aforementioned effect could have been reversed. Investors who exited the small mining stock sector in order to get into cryptocurrencies (altcoins in particular) can now aim to exit this market (people tend to sell on dips, in fact, that’s why dips happen in the first place) And back to what I “loved” before – junior miners.

This specific phenomenon can be seen from a broader point of view when one compares the prices of gold and bitcoin.

As I wrote, the correlation is probably stronger in the case of altcoins and altcoins, but gold and bitcoin have more comparable price data, so that’s what I’m going to analyze.

Although both gold and bitcoin have been on the rise between 2014 and now, they often move in opposite directions in the short term. Short-term bottoms in gold, in particular, are usually followed by a drop (larger or smaller) in bitcoin.

Interestingly, I originally showed the chart above several months ago, and please note that this trend has been working its magic lately.

Gold formed a short-term bottom, rallied, and now Bitcoin is sliding. why? Perhaps because people are tired of Bitcoin not being able to hold up, while gold has gone up. So they flocked to gold, silver and – Possibly intensely – for beginner stock miners.

Well, does that mean that with bitcoin sliding off a cliff, small miners will now rally?

number.

The market does not move up or down In a straight line, right? Well, Bitcoin doesn’t work either. How low is too low, then? This is where the techs come in.

Remember when I wrote that Bitcoin was topping out at about $50,000? Well, it moved above that a little bit, but it didn’t trade there for very long.

The major cryptocurrency fell like a stone into the water, and it did so in line with technical principles. Bitcoin formed a bearish head and shoulders pattern, and after breaking below the neckline earlier this year, it then corrected slightly before dropping below $20,000.

All of this is a textbook example of how the head and shoulders pattern works.

Now, the size of the drop based on this model is likely to be equal to the size of its head. I have outlined it with dashed lines.

Guess what – Bitcoin just moved to that target level (highlighted in green) recently. This is a strong indication that the bottom has been reached, and the second indicator comes from the huge volume that accompanied the decline and the fact that the decline was very sharp. The ROC (Rate of Change) indicator at the top of the chart above is approaching -25 and when this happened and bitcoin was after a huge drop in volume, it then went up.

What’s even more interesting is that those were also the times when gold went down.

The sentiment itself is the latest indication that Bitcoin’s short-term bottom (!) is near or near. Just go to any news site and look at what is being written about Bitcoin – it’s all scary and negative. Or at least the majority of the news/articles. This is what happens when prices fall to their lowest point. Remember what was written on the same pages when bitcoin was trading above $50,000? It was all sunshine and rainbows. All this time, I warned about the incoming chip. Very few listened at the time, just as very few wanted to hear about the upcoming tranche in small-cap mining stocks.

Anyway, here’s how often people search for “crypto scam” on Google (graph courtesy of Google Trends).

Other distinct peaks in these searches were in May 2021 (Bitcoin’s big, big drop), early November 2021 (a major peak in Bitcoin), and the end of January 2022 (a major bottom in Bitcoin).

Interest was only this high when there were major shifts in Bitcoin. And since it is quite obvious that the previous move in Bitcoin was to the downside, it cannot be a top. Therefore, there is likely to be a major bottom in Bitcoin.

Not necessarily the last, but a major one for some time. A Low Big Enough To Spark A Big Bitcoin Rally… And a significant decline in the precious metals sector!

The herd is easy to follow. “Miners are good, Bitcoin is bad” is the current word out there. This mantra is also easy to repeat. But what is easy and what is profitable are rarely the same thing, which is why many tend to lose money over time. I’m not saying every price move can be predicted – it just can’t be. However, over time, after logical analysis and attention Not Following the herd often leads to huge profits.

It is my responsibility to keep you updated on my market views, which I strive to be based on reasoned analyses, free from bias. Whether it is possible for humans to achieve this kind of objectivity is another question, but as far as I can, I aim to provide as objective an analysis as possible. At the moment, the way I see it, Bitcoin appears to have formed a short-term bottom, and mining stocks have formed a short-term top or are about to do so soon.

Of course, I can’t give any guarantees, but in my view, the next move lower in the precious metals sector – especially in small mining stocks – is likely to be something epic.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect the opinions of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will not be held liable for losses and/or damages arising from the use of this publication.

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