Bitcoin (BTC) appears to be on the verge of experiencing a significant price correction in the coming days, as indicated by a fractal that compares its performance to gold. It is worth noting that the leading cryptocurrency has seen a rally of more than 132% in 2024, including a 47% surge following Donald Trump’s election win in November.
The possibility of a sharp correction in Bitcoin’s price is highlighted by veteran analyst Peter Brandt, who points to its performance against gold futures. The Bitcoin-to-Gold ratio (BTCUSD/GC1!) has reached a critical resistance zone between 34 and 37, a level historically 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 resulted in significant price declines in Bitcoin’s USD pair (BTC/USD). For instance, in March 2024, when the Bitcoin-to-Gold ratio reached the 34-37 resistance area with an overbought RSI, the BTC/USD pair peaked near $74,000, followed by a 33% correction. Similarly, during the 2021-2022 period, BTC/USD experienced a 75% decline after reaching an all-time high of $69,000 in November 2021, coinciding with the Bitcoin-to-Gold ratio reaching the critical resistance zone.
An overbought RSI on the Bitcoin-to-Gold ratio’s weekly chart has consistently signaled corrections in BTC/USD before 2021. Notably, BTC/USD peaked in December 2017 and June 2019 when the ratio’s weekly RSI entered overbought territory, despite the ratio itself being much lower at 15 and 10, respectively, as depicted by the dashed horizontal lines below.
After reaching these peaks, BTC/USD dropped by over 85% and 72% in December 2017 and June 2019, respectively.
Overall, this fractal suggests that traders tend to view Bitcoin as a high-risk, speculative asset and gold as a safer hedge during bear markets. As Bitcoin becomes overvalued relative to gold, investors tend to rebalance their portfolios by reducing Bitcoin exposure, leading to sharp price pullbacks.
In terms of potential downside targets, previous corrections from local weekly tops have seen Bitcoin testing the 50-week exponential moving average (50-week EMA) as the primary target. The current scenario indicates the possibility of a similar correction in early 2025, with Bitcoin currently facing resistance at the 1.618 Fibonacci retracement level of around $102,000.
If a correction occurs, BTC/USD may reach the $65,000-69,000 range, aligning with the 50-week EMA and 1.00 Fib line, which would amount to a 30-35% correction by March 2025. On the other hand, a breakout above the $102,000 resistance level could pave the way for a rally towards $150,000, in line with numerous bullish BTC 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.