Gold and Bitcoin continue to head in the opposite directions. The cryptocurrency broke above the $50,000 hurdle for the first time ever on Tuesday and is continuing to push to new uncharted territories at the start of today’s session, hitting a high so far of $51,500. In contrast, gold is now looking quite bleak after breaking the $1800 support as investors keep a close eye on government bonds after the 10-year US yield climbed above the March 2020 high the day before. Bond prices have slumped in recent weeks with investors piling into the more risk-sensitive assets like stocks, cryptos, crude oil and copper amid speculation that the ongoing COVID vaccine rollout, slowing virus outbreaks and ongoing central bank and government stimulus will all help to stimulate a sharp global economic recovery. In other words, the “reflation” trade has been kind to cryptos, but not much for safe-haven gold.
Bitcoin remains fundamentally supported because of growing demand as major companies warm towards cryptocurrencies. So, even if prices were to correct themselves it is unlikely to be in the style of the late 2017 drop, when Bitcoin went on to lose more than 80% of its value by late 2018. Bitcoin has become a lot more stable and although it will dip here and there, it is unlikely to drop by similar amounts in percentage terms again. But in so far as the short-term is concerned, Bitcoin will need to hold its own above the $50K to keep the bullish momentum alive, otherwise a short-term correction could be on the cards.
At the time of writing, Bitcoin was testing the upper resistance of its bullish channel around $51,500. While a bit of a pullback is possible, for as look as it holds above that $50K level in the days ahead, the bullish momentum will be kept alive. Meanwhile, there are no obvious technical levels to watch on the upside, except the big milestones like $55K, $60K etc.