Home Forex The message from tech stocks and Bitcoin to gold investors

The message from tech stocks and Bitcoin to gold investors

by SuperiorInvest

Who would have thought that those markets are connected? They are.

Unexpected Connections

Alright, it's an alternative to fiat currencies, such as they are, but what about tech stocks? What could they have in common with the precious metals market?

More than it seems at first glance. In particular, the values ​​of mining and technology stocks have moved in a very specific way in the past, and since the current situation appears to be very similar to what we saw more than two decades ago, it is time to pay attention.

It just (!) clearly invalidated its breakout above the 2021 highs. This is a big deal, as tech stocks were the most popular and leading stocks during the current (previous?) rally.

AI will change the world! It's the new dollar! Etc. The new paradigm.

And yes, AI will change the world, but in my opinion, it is overrated right now. It is the dotcom bubble 2.0. Just because AI will change the world doesn't mean everything will happen now. Sure, some advancements have become immediately useful, but the hype was too big, as was the case with the Internet in general. It changed the world, but the initial rally in tech stocks – and the stock market in general – was a speculative bubble. Chances are we've seen one this time too.

NASDAQ's invalidation of the move above previous highs is a big deal, because it is a clear technical signal that “this is it,” this is the top.

This is important for us precious metals investors and traders because of the specific link between technology stocks and mining stocks.

If this is dotcom bubble 2.0, then what happened in version 1.0 probably applies just fine this time; After all, history rhymes.

The drop in technology stocks took mining stocks with it. To clarify: They both fell together until tech stocks hit their previous lows, and then miners bottomed out as tech stocks continued to fall.

In this case, the previous low is at about 10,000, so it looks like we are about to see miners drop MAJORLY.

daily COMPQ

The NASDAQ fell decisively yesterday, proving that the break above the 2021 high is history and confirming my bearish indications from previous weeks.

This is an important sell signal not only for technology stocks, but for all other stock indices, as US technology stocks were very important in leading the recent rally.

MSWORLD Weekly

Global stocks reached their all-time high, which already acted as the ultimate resistance that stopped the rally, not only in stocks, but also in miners (bottom of chart).

And just as miners peaked with the stock at those levels, the same thing is likely happening now.

Based on the most recent decline in global stocks (and the RSI based on it), it appears that the decline has already begun.

The 30-year chart above also does a great job of putting the recent rally in mining stocks into perspective. Can you see how few miners recovered in 2024 compared to where they were previously? And that's what happened with gold reaching new all-time (nominal) highs. The miners are really extremely weak, and when the stock finally drops significantly, the miners are likely to drop in a really extreme way.

It seems that this huge slide is already underway, but almost no one notices.

The bitcoin situation supports all of the above.

BTC Chart

Momentum is gone, breakouts above 2021 highs are invalidated, and this popular USD alternative is falling while USD itself is recovering.

Interestingly, this is the time when people expect the Bitcoin halving to trigger a rally, since that is what has been happening in every case where it happened.

BTC Halving Schedule

In my opinion, this argument is very weak. The truth is that bitcoin was in a long-term uptrend, and pretty much anywhere you put any type of cyclical measure, it would show that in the medium term, the price went up.

And now, everyone and their brother (at least in the circles that are interested in cryptocurrencies) is expecting Bitcoin to rally once again as the halving approaches. [going to take place this weekend].

Do you know what happens when everyone interested in a given market is waiting for some type of event to trigger a substantial rally? They buy BEFORE that event takes place. And what happens – in this case – once the event finally takes place? Since all interested parties had already bought, at that point the price… falls, despite the fundamental reasoning.

Sound crazy?

That's exactly what happened when the iShares Silver Trust ETF (NYSE:) was launched. Remember what people were saying many years ago when this ETF was about to launch? Silver was already recovering waiting for this event that would make it available to the general public; Huge amounts of investment capital were supposed to drive the price of silver to the moon. Triple-digit silver was a safe bet.

What happened?

daily SLV

Silver rallied immediately after the launch of the SLV ETF and then crashed, erasing 1/3 of its value.

EXPECTATIONS of the launch have driven up the price of silver, but when that finally happened, the rally was erased.

Market realities

So will the bitcoin halving really increase its price sustainably, as expected? No. It may recover for several days, but then it will likely go down.

With the USD going up and down… Will stocks, bitcoin and many other assets really hold up? History and analogies with 2008 and 2020 suggest otherwise. Precious metals and miners are likely to fall along with stocks as the USD rises, at least initially (in terms of weeks/months). Then, as stocks continue to decline, PMs and miners are likely to initiate a massive rally. The current rally in gold is likely over, and what we see now are likely only temporary, geopolitically driven rallies that will likely be followed by larger declines, such as what we saw after powerful pullbacks that formed at huge volume levels. .

Is this time really different? Those are expensive words in the market. What is much more likely is that history will rhyme again. Let's take advantage of this.

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