Cryptocurrencies are on the rise again after holding their own in a relatively tight range over the past couple of weeks. Sentiment has improved as the flow of bearish news has reduced somewhat after being weighed down by growing regulatory pressures. At last check Bitcoin was up 3%, Ether was nearly 5% better off while Dogecoin was the standout winner with a rise of 10%, boosted on the back of news crypto exchange Coinbase had added the meme-based coin to its professional trading platform.
Gold vs. bitcoin
Bitcoin’s recent volatility has coincided with gold rising. There was speculation that crypto investors used their profits to buy gold. Although some undoubtedly did just that, it is difficult to say whether this was the reason why gold prices rose. Bitcoin and gold are two different animals, and I don’t think we should treat them as if they are somehow related to one another. Bitcoin and gold don’t have a consistent relationship like gold and yields, for example, do. There have been times where gold and Bitcoin both rose and fell in tandem, while for extended periods the twain went their separate ways. I expect this inconsistent relationship to remain true in the long-term as I don’t think gold can ever be bitcoin, or bitcoin can ever replace gold. They are just two different asset classes.
Bitcoin is not a “store of value” yet
For now, Bitcoin and other cryptos remain a highly speculative asset class to be considered “store of value.” The notorious corrections need to be addressed for a start, but I am sure there are some investors that like the fact they tend to drop big every now and again. The drops provide new opportunities to buy at a discount and the rallies offer them the opportunity to sell at a premium. This actually makes Bitcoin more of a speculative asset class than many other assets. But Bitcoin investors know this, and who are we to tell them investing in Bitcoin is not right for them?
The Independent has shared this handy chart showing Bitcoin’s historical price corrections:
The recent correction is only the sixth worst price correction in bitcoin’s 12-year history. The key question is whether Bitcoin will fall more in June or have we already seen a bottom.
Well, Bitcoin formed an inside bar candle on the weekly chart last week, suggesting the worst of the selling may be behind us, as prices continue to coil inside a narrowing range. A breakout is imminent, but will it be to the upside or the downside?
Source: ThinkMarkets and TradingView.com
Some of the other cryptos have performed better. Doge has already broken above last week’s high after Coinbase added the meme-based asset to its professional trading platform:
Source: ThinkMarkets and TradingView.com
Another crypto that is catching my attention today is Ether:
Source: ThinkMarkets and TradingView.com
ETH/USD was testing the resistance trend of its triangle pattern at the time of writing. Will it break out?
If you missed out on the recent volatility in cryptos, you may want to read
THIS article, which will help prepare you to take advantage of the next time prices swing violently.