Bitcoin’s Losses Set Up Gold's Next Monster Rally

In case you weren’t watching the cryptocurrency market over the weekend, Bitcoin just did three things that are going to light up the gold market like a July Fourth bottle rocket.

A few weeks ago, I talked about the fact that Bitcoin was having a tough summer, according to the charts.

The cryptocurrency had broken below its 50-day moving average on June 16, signaling that the trend was beginning to turn on investors.

But things got much worse this weekend.

On Friday, the trustee overseeing the bankruptcy of Mt. Gox was set to begin repaying creditors in Bitcoin (BTC) and Bitcoin Cash.

The payout comes after a lengthy process following the exchange's collapse in 2014 due to significant hacks, which led to the loss of a large amount of Bitcoin.

The repayments mark the conclusion of a decade-long wait for about 127,000 creditors, and over $9.4 billion worth of Bitcoin that will be distributed.

That pressure led to fears in the Bitcoin market pushing Bitcoin below the psychologically important $60,000 price, a level that has been holding as support since March.

In addition to that break, technical traders in the Bitcoin market – and there are a lot of them – are now watching the popular cryptocurrency break through its second significant trendline.

As of this morning, Bitcoin is spending a second day below its 200-day moving average.  A break below this trendline will almost always garner some buying as investors try to time a bottom, but the negative momentum and headlines toward Bitcoin are likely to was that optimism away quickly.

Bitcoin Price Chart

Here's Where It Turns Good for Gold

Bitcoin and Gold have been battling it out for the last few years as investors have been using both as “risk off” assets.

For decades, gold has been seen as the “safe” storage of value when uncertainty in the market rises.  That long-term strategy started seeing a challenge in 2020 as Bitcoin saw a resurgence in popularity.

The bear market of 2022 saw both Bitcoin and Gold move higher as investors started to accept Bitcoin as an alternative safe store of value.

This weekend’s plunge in the Crypto market now has investors thinking that gold is the right play as the political and geopolitical backdrops are seeing a surge in uncertainty.

The result, a surge in gold prices that is ready to spark another breakout rally.

The SPDR Gold Shares (GLD) have been trading in a tightening range since April.

That range is now seeing a short-term breakout higher as GLD shares are moving higher on Bitcoin’s losses.

Investors should expect further weakness in Bitcoin, and other Cryptocurrencies, to benefit the outlook for Gold, at least for the next few months.

GLD Price Chart

The last similar breakout in the SPDR Gold Shares in March resulted in a 16% rally over a two-month period.  A similar move will target a $250 price target for GLD shares.