Issue 115 – What Gold Is Telling Us About Bitcoin

November 17, 2021


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After sixteen months of consolidating, gold may finally be breaking out amid concerns over higher inflation.

What does that have to do with Bitcoin and the crypto market as a whole?

More than you might think, and I’ll explain everything in today’s newsletter!

Plus, updates on DXY, BTC, ETH, LINK, and VET.

Let’s begin!


Gold and Bitcoin: More Amicable Than You Think

According to many on Twitter, gold is Bitcoin’s enemy or, at the very least, an asset that Bitcoin is moving to replace.

And while I agree that BTC will overtake gold one day, the relationship between the two is more amicable than most think.

Gold has often served as an inflation hedge. So it makes sense that Bitcoin, being known by many as “digital gold”, would also benefit when inflation runs high as it is right now.

So it makes a lot of sense to see gold (XAUUSD) breaking out on the weekly time frame.

XAUUSD (weekly time frame)

Those who believe gold is inversely correlated to Bitcoin would see this as a bad sign for cryptos.

But there’s no evidence to suggest the two are inversely correlated.

In fact, since the 2015 lows, there’s more evidence to suggest that XAU and BTC move together.

Bitcoin/gold overlay (weekly time frame)

It’s certainly not a perfect correlation by any means. But I’m expecting any positive correlation here to increase as inflation worries remain elevated.

So what does the gold breakout tell us about the future for Bitcoin?

If it were a few months ago, I’d say it doesn’t tell us much.

However, in an environment where inflation worries are running high and for a good reason, a breakout from gold only supports the bullish Bitcoin narrative.

US Dollar Index (DXY)

The US dollar has been on a tear recently, and that’s weighed on Bitcoin and the crypto market at large.

However, the DXY reached a supply zone on Wednesday and is currently forming a bearish rejection candle.

That said, whether or not we see today’s session close below 95.80 will be critical. That’s a key level that dates back to 2019. There’s also some support around 95.50.

Unfortunately, the only way to confirm any continued weakness from the US dollar is a close below 93.50. So it could be some time before we get the confirmation we seek.

DXY (daily time frame)

Bitcoin (BTCUSDT)

It’s been a relatively slow day for BTC overall. The market is still digesting Tuesday’s selloff, and that may be the case for some time.

I know many are expecting a parabolic move from Bitcoin any day now, but that’s why I’m not putting high hopes on it. The market has a way of humbling the masses.

BTC would need to climb back above $63,300 on a daily closing basis to open up $66,000. Above that is the $70,000 area.

What might be the more likely path in the short term is a move to test the $55,000 region. Whether we get a retest of $63,300 first is anyone’s guess.

I’m staying open-minded here as everyone should during consolidation.

BTCUSDT (daily time frame)

Ethereum (ETHUSDT)

ETH is trying to hang onto the $4,200 area that I’ve mentioned a few times recently. A bounce from this area would take Ethereum back to $4,400.

Alternatively, a move below $4,200 would expose the confluence of support between $3,800 and $4,000.

I think the scenario of a $4,000 retest is still very real. Of course, that doesn’t mean it will happen, but I’m prepared for it just in case.

On the other hand, if ETH can stay above $4,200 and reclaim $4,400 on a daily closing basis, then I think we see a push to all-time highs.

ETHUSDT (daily time frame)

Chainlink (LINKUSDT)

Tuesday’s close for LINK confirmed a false break above triangle resistance near $33. I spoke about this breakout at length last week.

However, as Cryptocademy members know, I wasn’t interested in buying LINKUSDT until the market closed above $35.50. That breakout never materialized.

At the moment, LINK is catching some support at $28, as expected. A close below that would open up $24 and potentially $21.

The July trend line near $32 is likely to attract sellers for the time being.

LINKUSDT (daily time frame)

VeChain (VETUSDT)

The VET chart doesn’t look all that constructive at the moment. We’ve discussed the significance of the $0.15 area before.

Unfortunately, VETUSDT closed well below that area on Tuesday, which means it’s back to serving as resistance.

It will take a daily and weekly close back above the level to flip it back to support.

In the meantime, I think everyone should prepare for a retest of the $0.12 area just in case. I’m not saying it will happen, but I’d rather be prepared than hope for the best and be caught off guard.

VETUSDT (daily time frame)

Justin Bennett

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About the Author

I'm Justin Bennett, a currency trader turned crypto enthusiast. My journey started with stocks in 2002. After limited success, I transitioned to currencies in 2007, which later became a full time trading gig. The journey continued, and in 2020, I committed to learning about cryptocurrencies. It was love at first sight. Cryptocademy.com is the culmination of my love for cryptocurrencies, my passion for financial markets, and desire to learn and teach.

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