Well-known indicators suggest that gold may be approaching a short-term top. What should Bitcoin do?

Will the ongoing correlation make a collapse in gold a threat to cryptocurrencies? Or will capital flow out of precious metals and into Bitcoin?

Precious metal gold and its cryptocurrency bitcoin have been locked in a race for safe haven status for more than two years now. Since Black Thursday, the two assets have become more closely linked as investors scramble for the best hedge against inflation.

And the initial safe-haven asset uptrend may be coming to an end, or at least preparing for a sharp correction. Will the ongoing correlation make gold’s collapse a threat to cryptocurrencies? Or will capital flow out of precious metals and into Bitcoin?

TD9 triggers sell setup on Gold chart

Gold prices peaked at nearly $2,000 during the last recession, and it took the precious metal more than a decade to climb back up to those highs and break above them.

Gold prices surged past $2,000 last month, setting a new all-time high, and August’s monthly close ended with a long upper shadow doji, signaling that gold is currently in a state of indecision and a possible reversal.

The new September open made the outlook for gold even worse, triggering nine sell setups on the TD sequential indicator, a relatively reliable technical analysis indicator designed by Thomas Demark to predict potential trend exhaustion and reversals.

(The DeMARK indicator was developed by industry legend Tom DeMark and is used by many top fund managers around the world. Tom is the president of Market Studies, the creator of the stock market turning point indicator, and one of the two most famous masters in the current field of technical analysis.)

The last major 9 signal was a buy setup one month after the 2015 low. The 9-digit reversal was so powerful that it left a trail that signaled the start of a new uptrend. And now, after a full 56 months of uptrend, the uptrend with a ROI of more than 85% may be coming to an end.

Will BTC benefit if gold's rise is blocked?

The outlook for gold doesn’t look bright, but is a safe-haven correction also bad for Bitcoin? Or, could the crypto asset benefit from it?

The latest correlation between gold and crypto assets suggests that if gold prices plummet, Bitcoin could also see a strong correction. If gold happens to drag down the first-ever cryptocurrency, the recent bull run could be in trouble.

But there is another scenario that could happen, where the smart money could flow out of precious metals and into cryptocurrencies like Bitcoin.

The recent pandemic and gold supply chain challenges have increased demand for commodity-backed tokens that represent ownership of physical gold. The trend of tying hard assets into cryptocurrencies has been gaining momentum, but Bitcoin already serves that purpose well, perhaps even better.

Unlike gold, Bitcoin has a known finite supply, and Elon Musk has suggested that more of the precious metal could be found from asteroids. The possibility that hedge funds are reallocating recent gold profits to Bitcoin, and other major shifts in demand for precious metals are possible, would also seem to make sense for capital to move into the cryptocurrency market.

As viruses, protests, and marginal unrest spread around the world, the need for non-material, non-sovereign, safe-haven assets seems increasingly evident. (Blockchain Knights)