Bitcoin posted double-digit gains in October, beating gold for the first time since June.
The world's largest market value cryptocurrency ended last month with a gain of 10,26%, breaking a series of three-month losses, according to Bitstamp data.
Meanwhile, gold gained only 2,74% in October, having fallen 3,17% in September - the biggest monthly drop since June of 2018.
Bitcoin made gains for five consecutive months from February to June - its longest winning streak since August of 2017.
Gold, however, registered losses in February, March and April. Yellow metal rose 1,7 and 7,9 per cent in May and June, respectively, although gains were scarce compared with 62 per cent and 25,89 per cent bitcoin which increased in the same months.
While the BTC outperformed gold by large margins in the five months to June, the tide turned in favor of yellow metal in the third quarter.
Bitcoin fell 6, 4 and 13,5% in July, August and September, respectively. Experts have linked the sale to fears of Facebook's Pound fast tracking regulation for cryptocurrencies in general, outperforming technical conditions and other factors.
Gold rose 0,23 per cent and 7,65 per cent in July and August respectively, with markets quoted in prospects for aggressive monetary easing by the US Federal Reserve and other major central banks amid escalating China-US trade tensions.
Metal fell 3,17% in September, but the decline was contained compared to BTC's double-digit sale.
Looking ahead, gold may underperform bitcoin in November as optimism on the US-China trade front may reduce the demand for shelter for the metal.
Also, in October 31, the Fed signaled that it would halt rate cuts to assess data received before considering reducing borrowing costs again, in part because of a possible easing of trade tensions, according to The New York. Times Gold, a zero-yield asset, generally applauds Fed policy and faces selling pressure when the central bank signals a break or rise in rates.
Meanwhile, seasonality is positive for bitcoin - cryptocurrency has gained in November in six of the last eight years. More importantly, BTC tends to accept a strong offer six months before half of the mining reward, according to historical data. The next event in half is scheduled for May 2020.
In addition, the ongoing rally in US equities may bode well for bitcoin. “Previous bitcoin bull races have been characterized by a gradual decline in stock market volatility. For example, we look at its inverse, though imperfect, relationship with the VIX Index over longer horizons (ie before 2017), ”wrote Delphi Digital analysts in their monthly report.
S&P 500 hit a record $ 3.066 on Friday and the bull market is expected to continue to be supported by three major buyers - corporations, foreign investors and US households - according to Goldman Sachs.
Bitcoin's technical charts are also optimistic, as seen below.
Daily, three day and monthly charts
BTC is currently changing hands at $ 9.170 on Bitstamp.
Prices were up 28% in the three days through October 27 (above left), with trading volumes reaching the highest level since February of 2018.
In addition, the recent retraction from $ 10.350 to $ 9.000 has been accompanied by a drop in volumes. A low volume setback is usually short lived. 200 day AM has a restrictive disadvantage since October 30 (above left).
All in all, the path of least resistance appears to be on the higher side and prices seem adjusted to revisit resistance at $ 9.600 and $ 10.000.
The bullish case would weaken if the 200 day AM at $ 9.106 were breached on the downside. This would validate AM's downside view of 5 months downward at $ 9.268 (top right) and is likely to yield a big drop to $ 8.500.
Note that BTC has repeatedly failed to maintain earnings above the 5 MA over the weekend. Bulls, therefore, need to progress soon.
Disclosure: The author has no cryptocurrency assets at the time of writing.