Will Bitcoin follow the trend of gold in the 1970s?


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The price of Bitcoin fell more than 11% from the level of $19,200 due to the impact of the weekend’s plunge. The market value has also fallen from US$581 billion to US$512 billion, and on-chain analysts are comparing the price trend of the past week with the fractal trend of gold in the 1970s.

As Mark Twain’s famous narrative, “History never repeats itself, but often rhymes”, it seems appropriate here.

Other factors that affect the price fall are the supply and price fluctuations on spot exchanges, but if the selling started a few days ago continues, then contrary to most popular beliefs, this may be beneficial to the price of Bitcoin.

SuZhu, CEO of Deribit Exchange, commented on the fall in Bitcoin prices and its response to gold trends in the 1970s.

He said, “Any Bitcoin that continues to fall will show bullish sentiment because the facts show that we are following the development of gold in the 1970s. As the legendary macro investor Paul Tudor Jones said, he successfully used fractals to predict The super cycle of the stock market in the 1980s.”

As the relevance of Bitcoin to gold has declined, the narrative of “store of value” and Bitcoin as digital gold is now replaced by the fact of shortage of supply.

This is not only because of basic analysis, but also based on CoinMetrics’s correlation between Bitcoin and gold and its price chart analysis. We noticed that Bitcoin technically tends to follow the long-term cycle of gold on a logarithmic scale. Moreover, if it can track its movements as closely as the past three months since September 2020, then this indicates that after breaking ATH (new price high) traders, there may be a mid-term correction over the weekend (which is true).

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In addition to the correlation with gold and falling prices, effective supply is also falling.

The supply of Bitcoin has dropped to its lowest level since 2019. If it continues to fall, the shortage argument may come into play again, because when institutions start buying bitcoins frantically again, prices will inevitably rebound, which may indicate that the cycle of the past week may continue to repeat itself.

Interestingly, this development was accompanied by the Citigroup’s announcement of a 2021 gold price target of $2500. Citi compares gold to the bull market of 1970-80. As early as 1970, there was gold that greatly exceeded the per capita money supply, which made it similar to the Bitcoin price rebound in 2020.

Regardless of whether we are in the 1970s or not, due to the increase in demand and the decline in correlation with gold, Bitcoin is likely to get rid of such a sharp correction fluctuation.