Market Analysis of Cryptocurrencies: Gold Tops $4,000, & Bitcoin Sets New ATH

US Government Shuts Down, Gold Tops $4,000, & Bitcoin Sets New ATH

This week’s biggest news in financial markets is Gold reaching a new all-time high over $4,000 an ounce. The latest gains in the precious metal could be due to economic uncertainty stemming from the US government shutdown. This uncertainty has also promoted volatility across the cryptocurrency market to pick up steam, most notably in Bitcoin – which also recorded a new all-time high above $126,000.

Physical Versus Digital Debasement Protection

Gold historically performs best during periods of global economic uncertainty. With war abroad, rising inflation, trade turmoil, and a debt disaster on the horizon, it’s no surprise that Gold is having its best year since 1979. Gold hitting $4,000 is being viewed as a harbinger of a crisis and comes as the US government shuts down. These latest developments could be enough to alter the risk appetite surrounding cryptocurrencies.

Gold and its best year performance since 1979
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Bitcoin was designed with many similarities to Gold, with the most obvious being a scarce supply. The goal with these attributes were to ensure growth in Bitcoin as fiat currencies continued their death spiral. The world is seeking to lessen their reliance on the US dollar. Because there is so much USD in the world relative to Gold, central banks shuffling dollars into Gold is showing up as parabola on the price chart. But what about Bitcoin? Will it follow Gold’s now historic rally?

Return of Bitcoin Volatility Pushes Price to New ATH

Despite initially dropping 7% after the Federal Reserve announced rate cuts last week, the news of a US government shutdown sent Bitcoin 15% higher, setting a new all-time high above $126,000. In recent months, Bitcoin has struggled to maintain its bullish moment, allowing Gold to steal the limelight. However, Bitcoin picks up as Gold pulls back, and vice versa. Gold’s rally is starting to look overextended, which could indicate Bitcoin’s run is just beginning.

Bitcoin’s weekly Bollinger Bands are expanding from a record-setting squeeze
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Bitcoin’s weekly candlestick added more than 10% to the ongoing recovery, but failed to penetrate and close above the upper Bollinger Band. The weekly Bollinger Bands in Bitcoin are now starting to expand after clocking in the tightest Bollinger Band Width readings in the history of the cryptocurrency. The failure could mean a revisit to lows and the expansion of the bands suggest that volatility will get violent from here on out. A strong breakout and weekly close above $126,000 could light the fuse of the next major rally – a rally that could possibly bring Bitcoin closer to the end of its bullish cycle.

US Gov Shutdown: The Reason For No Altcoin Season

If Bitcoin is nearing the end of its cycle, altcoin season should be just around the corner, according to past cycles. However, this cycle has been nothing like past cycles, and anything is possible. In fact, Bitcoin Dominance (BTC.D) is hinting at a return to Bitcoin outperformance over altcoins. The metric which weighs BTC against the rest of the crypto market, has held at a key support and resistance zone, potentially pointing to a revisit of local highs. This is an unusual development if Bitcoin is indeed nearing its cyclical conclusion. Either that isn’t the case, or the economic uncertainty that’s fueling the Gold rally could keep capital on the safer end of the risk curve.

Bitcoin Dominance (BTC.D) is holding above altcoin season levels
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A lack of a broad-based altcoin season with full participation across the market doesn’t mean that other altcoins won’t outshine Bitcoin in this next phase of the market. Several top altcoins are showing signs of resilience and brewing technical strength. The potential of altcoin ETFs beginning to launch in the US could be a sudden driver of interest in select altcoins. For example, Canary Capital has filed an S-1 amendment with the SEC seeking approval of spot Litecoin and HBAR ETFs. The filing, which Bloomberg analysts describe as “pretty finalized,” even listed tickers for each ETF.

Altcoins Still Have Hope for a Show of Strength

The altcoin market, sans Bitcoin and top altcoin Ethereum, can be viewed by examining the TOTAL3 index on TradingView. This index represents all cryptocurrencies except for BTC and ETH. Currently, the TOTAL3 index on the monthly timeframe shows the RSI just below 70. The RSI is also potentially breaking out from downtrend resistance.

Above 70 on the RSI signals “overbought” conditions. However, this is an anomaly in the crypto market. Readings above 70 on the RSI tend to lead to the longest rallies and the strongest moves, especially in altcoins. If the RSI can close the October session with the RSI above 70, altcoins can still show more bullish price action – they may still fail to outperform Bitcoin, however, given the direction Bitcoin Dominance is headed in.

Conclusion

Caution continues to be warranted across the crypto market given worsening economic conditions. Only Bitcoin appears to be benefiting from the uncertainty, possibly cementing its status as an inflation hedge alongside Gold – which has shown record-breaking strength recently. The lack of altcoin participation could be largely due to a reluctance to take on more risk than necessary until the US government shutdown is settled and business as usual is resumed. 
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The return of volatility in Bitcoin is likely to spill over into the rest of crypto, however, meaning that altcoins will still present plenty of intraday trading opportunities. If trading in the short term until more longer-term clarity arrives, pay close attention to stop loss placement and take profit levels, keep emotions in check, and always stick to your trading strategy. Trade top cryptocurrencies at YouHolder today.