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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.

Bitcoin BTC BTCUSD
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…

Bitcoin BTC BTCUSD
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.

Bitcoin BTC BTCUSD
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.

BTC BTCUSD
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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