Relationship among Virtual Currencies, Gold, Stocks & For ex| Influencer‘s Insight •Jasper Lo

Bitcoin and Ethereum spiraled recently amid a stream of good news. The leading Bitcoin soared about 350% in the past 12 months and has jumped nearly 60% since the beginning of the year. Ethereum, the second-largest cryptocurrency by market cap, swelled 415% over the past 12 months and has surged 132.80% year-to-date.

Recently, virtual currencies kept registering fresh highs as boosted by the $1.5 billion Bitcoin purchase of Tesla, which also planned to accept it as a form of payment in the future. Meanwhile, the Chicago Mercantile Exchange (CME) launched Ether futures on Feb. 8, which inspired Ethereum's price to move higher. Virtual currencies were hard to predict as their prices always rid on a roller coaster, despite the fact that they are gaining more and more ground in traders since it was available and that even the CME has launched futures contracts on them. Based on their past years performance, however, they start showing clear trend signs and giving a role to the traditional technical analysis.

First of all, I found that charts of Bitcoin and US stocks are nearly identical, with their similarity reaching as high as 90%. The traditional stock market and the emerging virtual currency market both benefit from risk-on trading as Bitcoin investment is linked to the risk appetite, that is, traders are willing to buy assets during risk-on times.

Besides, the USD-denominated Bitcoin and Ethereum move similarly with non-dollar currencies and commodities priced in dollars. In other words, the prices of the US dollar and virtual currencies move in opposite directions. But virtual currencies and gold prices move in tandem at times while in reverse at others. Investors often believe that Bitcoin is a hedge as good as gold, which is totally a misunderstanding. The case is virtual currencies are prevailing in markets. Capital inflows from the precious metals market, hitting the performance of precious metals. Therefore its inaccurate to judge the trend of virtual currencies on gold prices.