There has been much action in precious metals. It seems as though a very important decline has swept through the market and that it might even continue. Gold, silver and other precious metals are frequently described as “alternative investments” or “alternative assets” as they don’t correlate with stocks and bonds, at least not very significantly. Bitcoin is also counted as an “alternative asset”. So, given the sudden, but not necessarily unexpected (as we mention in our Gold & Silver Trading Alerts) decline in precious metals, what has been the reaction of Bitcoin?
It seems that there has been no visible response and we will describe the situation in more detail. The action yesterday and today seems to show that Bitcoin and the precious metals market might not be linked in an obvious way, if they are linked at all. So, the important takeaway here is that the action in one market might not necessarily translate into action in another market. Gold almost fell off a cliff, yet Bitcoin barely moved. This also shows that there might be diversification benefits to holding a small amount of Bitcoin in your overall portfolio (say, no more than 5%). Any idea that Bitcoin and precious metals should move in the same direction seems shaky at best.
For now, let’s focus on the charts.
On Bitstamp, there was barely any movement yesterday in terms of price. The volume was higher than on the day before but there was no decisive move in any direction. Bitcoin stayed below $300 but above $250 (green line in the chart). This opens Bitcoin up to declines to the $250 level but doesn’t make the situation decisively bearish at the moment. Yesterday, we wrote:
(…) The steady move down since [previous] Monday is a bearish indication but it isn’t bearish enough, in our opinion, to go short. The recent trend up might have been broken to the downside but we also have to look at the situation from the long-term perspective.