Gold Expected to Drag Bitcoin to New YTD High Soon

Bitcoin (BTC) looks poised to resume on its uptrend towards its YTD high around $12,400 and above, because of its strong correlation with gold (XAU/USD). Both assets appear to have developed strong ties since March 2020.

Gold and Bitcoin get their fundamental cues for the same source; the global central bank policies in response to the Coronavirus pandemic. This includes near-zero interest rates, a growing fiscal deficit, and a weakening US dollar (DXY). These policies cause low-risk assets (apart from gold and Bitcoin) to return meager yields, forcing investors to seek riskier assets.

Also, the price action of both gold and Bitcoin remains erratic as investors continue to worry about the delayed second COVID-19 stimulus package, as well as the uncertainty hovering over the November US Presidential Elections.

BTC runs the chance of being increasingly bullish in the coming days and weeks if it maintains its correlation with gold, given that the precious metal is set for a bullish rally.

However, skeptics believe that gold and bitcoin could be wracked with a downward correction if Congress fails to pass the second stimulus package before the elections. In this scenario, investors will seek refuge in the safety of cash, which would cause the dollar to skyrocket.

Key BTC Levels to Watch

After a sharp drop yesterday, Bitcoin found strong support at the 50 SMA just as we projected in an earlier analysis. Presently, the cryptocurrency is balancing itself above the 100 SMA as it prepares to spike upwards again.

Meanwhile, the major resistance levels to watch are the $10,800 and $10,900 in the meantime. A break above $10,900 could open the doors to $11,200 once again.

Total market capital: $345 billion

Bitcoin market capital: $198 billion

Bitcoin dominance: 57.3%

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