‘As goes January, so goes the year’ — the old saying in the stock market may spell disaster for stocks but gains for bitcoin in 2020.
January closed for the stock market on Friday with a massive selloff, erasing the gains for the month, beincrypto.com reported. Conversely, bitcoin’s price has held stable after substantial gains in the final week of the month.
Stock market predictors have long known that January is a great indicator of annual changes. Starting from 1950, when the S&P500 was positive in January, 86% of the time, the rest of the year was also positive. This is called the “January barometer.”
What’s more, election years have an even higher correlation. When January has been positive during an election year, 100% of the years have been positive as well. Returns during those years averaged 16.6%.
However, the converse is also true – negative Januarys often spell stock market disaster. With January closing negatively for stocks, many investors are expecting a bearish 2020.
Bitcoin bulls gearing up
Bitcoin, however, closed the month of January with strong gains. The month started with the coin hovering around $7,150 and ended with bitcoin showing support above $9,250, a gain of more than 29%. This positive growth cycle would seem to indicate that bitcoin’s 2020 will be bullish, based on stock analyses.
As investors have surveyed global news, many have already begun pulling back from equity positions. The Wuhan virus, geopolitical tensions, and Brexit have all affected stock market stability.
As investors move out of stocks, they seek safe-haven assets, and bitcoin has begun to show such qualities. Along with gold and other precious metals, bitcoin offers investors a hedge against global meltdown.
With the stock market showing signs of weakness for the year, its no surprise that bitcoin is showing strength. If the indicator proves true, the bitcoin bulls may well be running for the remainder of the year.
However, there are traders who remain extremely bearish on BTC despite its uplifting price rally. Elliott Wave practitioner Henrik Zeberg is convinced that the leading cryptocurrency could drop to as low as $2,000 without even reaching $10,000, U.Today reported.
Henrik Zeberg tweeted: “#Bitcoin Wave C in 5 waves should bring us down to ~2000 USD. Often trendline set by wave 2 through 4 – gives the bottom of wave 5 (through 3). I will eventually buy #Bitcoin – but not yet…… not yet…..!”
The Elliott Wave theory presupposes that any market tends to move in repeating patterns. Zeberg’s chart shows the corrective phase that constitutes of three waves (A, B, and C). Apart from these corrective waves, there are impulse waves that are numbered 1, 2, 3, 4, and 5.
According to Zeberg, the 2-4 trendline could be used to identify that the bottom of the fifth wave 5 could be around $2,000. In such a way, bitcoin would finalize the C wave that is made up of the five above-mentioned sub-waves and become an attractive buying opportunity for the trader.
Waves can be subjective
It should be noted that this theory is very confusing. There is even a joke about five Elliott traders all showing different wave counts in the same room, which means that there is a high degree of subjectivity there.
As reported by U.Today, Silk Road founder Ross Ulbricht also applied the Elliott Wave theory to determine that the price of BTC could surge to $100,000 in 2020.