Bitcoin price has turned bullish over the last three weeks, and looks to be breaking up and out of a near textbook bull flag pattern. The only problem is that the pattern could be a page out of gold’s playbook, which recent price action would suggest the top cryptocurrency isn’t yet out of the woods.
Here is a closer look at the ominous gold fractal that could act as a preview of what’s to come across the cryptocurrency market before any upside continues.
Gold Versus Bitcoin Price Fractal: Matching Textbook Bull Flags
All throughout 2019, Bitcoin and gold had been performing nearly neck and neck, when at some point gold took the lead and the crypto market took pause. Once gold set a new all-time high, the precious metal pulled back and capital began to flow into crypto.
The scarcity of crypto can create an environment for exponential price action, and with trillions from gold coming in, the market cap of BTC increased by as much. Gold’s rally peaked months before the crypto bull run did, and it could potentially be used as a roadmap in Bitcoin.
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Both Bitcoin and gold have similar traits, and both assets could be forming a massive, textbook bull flag. The key difference, is where the two assets are in the chart pattern.
Will BTC follow the XAUUSD bull flag? | Source: BTCUSD and XAUUSD on TradingView.com
Will Crypto Follow The Fractal Breakout Pattern?
In gold, the flag broke upward several months ago, but bears have stayed relatively strong so there have been multiple retests of downward sloping resistance as support.
Each retest has held, including last night’s “flash crash” caused by weekend low liquidity conditions and holidays in Japan and Singapore, according to Marcus Garvey, head of metals strategy at Macquarie Group Ltd. Even as deep as the flash crash got, it has only left a wick back into support.
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Bitcoin on the other hand, is only now breaking up from the top trend line of bull flag resistance. If it follows the path of the primary precious metal it was designed after, digital gold could spend ever weeks consolidating further before the pattern fully confirms and the resulting next wave begins.
The bull flag target on the XAUUSD trading pair is around $2,600 per troy ounce of the gold standard. In Bitcoin, the target is closer to $150,000 per coin, making the cryptocurrency market the more lucrative of the two plays. The top cryptocurrency by market cap hasn’t fully completed a breakout of the pattern just yet, so it is too early to tell if the fractal will be followed further.
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Featured image from iStockPhoto, Charts from TradingView.com