Is Bitcoin topping out? Gold fractal hints at 35% BTC price correction ahead

1 week ago 3

Bitcoin (BTC) looks poised to undergo sharp price correction in the coming days, based on a fractal that measures its performance against gold. For context, the top cryptocurrency has rallied by over 132% in 2024, including a 47% rally after Donald Trump’s election win in November.

Bitcoin-gold ratio warns of potential correction

As highlighted by veteran analyst Peter Brandt, the higher probability of a sharp Bitcoin price correction comes from its performance against gold futures.

The Bitcoin-to-Gold ratio (BTCUSD/GC1!) has climbed into a key resistance zone between 34 and 37, a level historically associated with local market tops. At the same time, the ratio’s weekly relative strength index (RSI) has breached the overbought threshold of 70, signaling potential overextension.

This pattern has previously aligned with sharp price declines in Bitcoin’s USD pair (BTC/USD).

For example, in March 2024, the BTC/USD pair peaked near $74,000 as the Bitcoin-to-Gold ratio hit the 34–37 resistance area, accompanied by an overbought RSI. What followed was a 33% correction.

A comparable 75% decline in BTC/USD unfolded during the 2021–2022 period, following Bitcoin’s all-time high of $69,000 in November 2021.

This price peak coincided with the Bitcoin-to-Gold ratio reaching its critical resistance zone between 34 and 37, reinforcing the significance of this area as a historical indicator of bearish reversals.

An overbought RSI on the Bitcoin-to-Gold ratio weekly chart has primarily signaled BTC/USD corrections before 2021.

For example, BTC/USD peaks in December 2017 and June 2019 occurred when the ratio’s weekly RSI entered overbought territory, even though the ratio itself was much lower at 15 and 10, respectively, as shown by the dashed horizontal lines below.

BTC/USD dropped by over 85% and 72% after peaking out in December 2017 and June 2019, respectively.

Overall, the fractal reflects a tendency among traders to treat Bitcoin as a high-risk, speculative asset and gold as a safer hedge during bear markets. As Bitcoin becomes overvalued relative to gold, investors appear to rebalance by reducing Bitcoin exposure, triggering sharp price pullbacks.

How low can the Bitcoin price go?

Bitcoin’s previous corrections from local weekly tops have had it test the 50-week exponential moving average (50-week EMA; the red wave) as the primary downside target.

The current scenario reflects 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, already showing signs of a pullback.

Should the correction ensue, BTC/USD’s possibility of reaching $65,000-69,000 aligns with its 50-week EMA and 1.00 Fib line. That comes to be around 30-35% correction by March 2025.

Conversely, a breakout above the $102,000 resistance level could set up Bitcoin for a rally toward $150,000, aligning with numerous bullish BTC predictions.

Consequently, a BTC/USD breakout will have the Bitcoin-to-Gold ratio rise above its 34-37 resistance area, delaying the bearish outlook discussed above.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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