Bitcoin (BTC) is a commodity. A quick glance at the S&P Commodity Index vs. S&P 500 tells us that commodities have been in a downtrend since Bitcoin (BTC)’s inception (Aug 2008). Despite that, Bitcoin (BTC) rallied 596,666,566% from a price of $0.003 in March 2010 to $17,900 in December 2017. This was a major achievement considering the trend was against Bitcoin (BTC) between 2010 and 2017. Equities rallied after the financial crisis whereas commodities other than Bitcoin (BTC) entered a bear market. Gold hit its all time high of $1900 in 2011 and soon entered a bear market. Oil had peaked before Gold at height of the financial crisis at $141.32 per barrel. When the financial crisis was ‘over’, commodities began to tumble.
A detailed analysis of S&P Commodity Index vs. S&P 500 shows that this trend has been observed in the past. In the early 70s, Arab oil exporting countries imposed an Oil embargo on US and its allies. The crisis led to rising commodities prices against equities. Soon afterwards, Silver hit its all time high of $49.45 in January 1980. Again in the 90s, the Gulf war drove the prices of commodities to a record high. When the crisis was over, equities started to gain against commodities. The internet boom of the 90s led to the tech bubble of the 2000. Again, equities collapsed as commodities rallied till the financial crisis of 2008. Once again, there is a growing concern among investors that the stock market is going to collapse.
Just like the tech bubble of 2000, we have reached another bubble phase. This time it is more serious and is rightly considered as the mother of all bubbles. We do not know yet when this bubble will pop, but we know that it will not be confined to equities alone. Equities have had their biggest run against commodities in their entire history for the first time! The S&P Commodity Index vs. S&P 500 ratio is almost close to zero. This goes on to show how devastating the next market crash will be. With elections around the corner in the US, this crash will likely be stalled for a year or two. However, there is no escaping it. The commodities market is poised for a reversal just as we have seen before. The only difference is, this time we have a new commodity, Bitcoin (BTC).
Bitcoin (BTC) is currently at the brink of a major breakout. This breakout could be to the upside or downside in the short term, but that is inconsequential. The major trend this time is in favor of Bitcoin (BTC). A trend reversal is around the corner for the commodities market in general and the bullion market in particular. The above weekly chart for BTC/USD shows that Bitcoin (BTC) is one heartbeat away from breaking the downtrend. The weekly candle is about to close just below the 21 Week EMA. It is highly probable that Bitcoin (BTC) will begin the next week above the 21 EMA. That will effectively put an end to this correction and begin a new trend.
Like rest of the commodities, Bitcoin (BTC) is likely to begin a new trend by the end of the year. However, like Gold and Silver, Bitcoin will remain sluggish for the next year or two until the stock market tops out. For the cryptocurrency space, this means that altcoins will move against Bitcoin (BTC) in this period. Towards Bitcoin (BTC)’s next halvening in 2020, we will see money flow out of equities and altcoins into commodities. By then, S&P Commodity Index will see a trend reversal against S&P 500. That is when Bitcoin (BTC) will see its best days in history.