Bitcoin (BTC) appears to be on the verge of experiencing a significant price correction in the near future, according to a fractal analysis comparing its performance to gold. It is worth noting that the leading cryptocurrency has surged by more than 132% in 2024, including a 47% increase after Donald Trump’s election victory in November.
Veteran analyst Peter Brandt has highlighted the increased likelihood of a sharp correction in Bitcoin’s price based on its performance relative to gold futures. The Bitcoin-to-Gold ratio (BTCUSD/GC1!) has reached a crucial resistance zone between 34 and 37, which has historically been associated with local market tops. Additionally, the ratio’s weekly relative strength index (RSI) has surpassed the overbought threshold of 70, indicating potential overextension. This pattern has previously coincided with significant price declines in Bitcoin’s USD pair (BTC/USD).
For example, in March 2024, the BTC/USD pair reached its peak near $74,000 when the Bitcoin-to-Gold ratio touched the 34-37 resistance area and the RSI was overbought. Subsequently, a 33% correction followed. Similarly, a comparable 75% decline in BTC/USD occurred during the 2021-2022 period after Bitcoin hit its all-time high of $69,000 in November 2021. This price peak also aligned with the Bitcoin-to-Gold ratio reaching the critical resistance zone between 34 and 37, further emphasizing its significance as a historical indicator of bearish reversals. An overbought RSI on the weekly chart of the Bitcoin-to-Gold ratio has predominantly signaled corrections in BTC/USD prior to 2021.
Overall, this fractal analysis suggests that traders tend to perceive Bitcoin as a high-risk, speculative asset and gold as a safer hedge during bearish market conditions. As Bitcoin becomes overvalued compared to gold, investors seem to rebalance their portfolios by reducing their Bitcoin exposure, leading to sharp price pullbacks.
In terms of potential downside targets, previous corrections from local weekly tops have seen Bitcoin test the 50-week exponential moving average (50-week EMA) as the primary support level. The current scenario indicates the possibility of a similar correction in early 2025. For instance, Bitcoin is currently testing the 1.618 Fibonacci retracement level of around $102,000 as resistance, showing signs of a pullback. If a correction occurs, BTC/USD could potentially reach the $65,000-69,000 range, aligning with the 50-week EMA and the 1.00 Fibonacci line. This would represent a correction of approximately 30-35% by March 2025. On the other hand, a breakout above the $102,000 resistance level could set Bitcoin up for a rally towards $150,000, in line with various bullish Bitcoin predictions.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.