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Saturday, October 23, 2021

Bitcoin Lags As Commodities Signal Recovery, Can BTC Reverse The Trend?

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After a correction, Bitcoin has returned to its previous range. The market might still be in a dangerous area, at least, until pre-crash support levels are reclaimed. At the time of writing, BTC trades at $50,267 with sideways movement in the lower timeframes and losses in the 7-day and 30-day chart.

BTC moving sideways in the daily chart. Source: BTCUSD Tradingview

But while the top cryptocurrency by market cap has been hit with a correction, the commodities market has seen some recovery after a major slump in 2020. Indicators still point towards downside risks, as Bloomberg Intelligence Senior Commodities Strategist Mike McGlone claimed.

Crude oil and Copper futures reached a 3-year high and an 11 year high, respectively. However, McGlone indicates that these commodities could benefit from a rise in equity prices. A dropped in these assets could negatively impact the market. McGlone said the following:

A key determination for a #commodity recovery is that broad prices show divergent strength when the #stockmarket corrects. Absent a 10% retracement in the S&P 500 since the March swoon, the Bloomberg Commodity Spot Index has been riding its coattails…

Source: Bloomberg Intelligence

Gold, Inflation And Bitcoin In The Post-Covid 19 World

On the other hand, Gold and Bitcoin could see further upside if government yields have reached a top. Gold trades north of $1800 after taking a hit during February 2021. This sent Gold’s price below $1,700 for the first time this year after an impressive rally during 2020.

The Covid-19 pandemic still plays a big role, as economic recovery expectations are high, but are yet to be supported by data. McGlone stated:

It may take until the May employment report to confirm or deny April’s anemic reading, but gold and Bitcoin are leaning toward price appreciation, notably if bond yields have topped.

Source: Bloomberg Intelligence

Indicators seem to point towards a weaker post-pandemic recovery in the U.S. Data provided by Holger Zschaepitz, Senior Editor at the Economic and Financial desk for daily Die Welt, reveal a “downside surprise” in retail sales during April.

Experts have a 1% median forecast on this metric but were disappointed as the third round of stimulus checks failed to meet a short-term goal. In addition, inflation is becoming a real conserve for both the U.S. and Europe. A rise in this metric has been BTC and Gold price catalyzers since 2020. Zschaepitz said:

Inflation fears rise on both sides of the Atlantic after data shows US inflation running hotter than expected: US inflation expectations – measured by 5y5yswap – jumps to the highest level since 2017 while Eurozone inflation expectations rose to the highest since 2018.

Source: Holger Zschaepitz

In the short term, Bitcoin could face more sideways movement with $47,000 serving as critical support and $53,000 – $55,000 as major resistance. Data from Glassnode suggest a bullish outlook with a low in the Short-Term Holder Spent Output Profit Ratio (SOPR) in the daily chart. A decline in this metric usually points to a price bottom, as seen below.

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