Despite the fact that goods can be completely different, it is still often the case that there are so many similarities in how they trade.

This is mainly due to fact that the traders of these goods are still all people (with similar psychology, for example), and not diverse beings (human and non-human), with completely different psychology.

Bitcoin and Stocks are really very different asset classes. However, many similarities can be found on their trading charts.

Thanks to these similarities one is able to use certain techniques to possibly forecast how they might trade. In fact, this is why technical analysis (when used correctly) can often be a useful investment tool.

My analysis of the stock market (Dow) and Bitcoin shows some interesting similarities of how they traded over the last nine years.

Below, is that comparison (top- Bitcoin and bottom Dow):

Both asset classes appear to have traded in a channel. The Dow appears to be the leading indicator, since its bottom was in 2009, whereas Bitcoin’s bottom was around 2010. This is why we could possibly use the Dow’s trading action to predict what could happen to Bitcoin.

The Dow has traded beautifully in the channel, in a typical 5-wave formation, with the 5thwave just going outside (showing how extended it currently is). The top or outside of the channel is an ideal place for a 5thwave to end.

Bitcoin has followed suit, and appears to be in the process of completing its 5th wave. Some would argue that the December 2017 high is the top of the 5th wave. I don’t think so. One of the reasons it is not the top of wave 5, is because it is towards the bottom of the channel.

The 5th wave top is likely to come at the top of the channel, but most likely (higher) outside the top of the channel.

Another observation is the fact that we could have a top of wave 5 towards the middle of 2019, if Bitcoin follows the same timing as the Dow.

Please note that this is not financial advice. I make no guarantees. This is just my humble opinion.

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  1. Roberto Candusio

    Nice article! I agree that psychology works similarly for cryptocurrencies and Down.
    However, the Crypto market is in its infancy, it is too small and it is subject to many external influences like technological shifts or new regulations, so it might be risky to compare those paths.