Bitcoin Faces Potential Correction Based on Historical Gold Fractal

Bitcoin, currently trading near $97,604, may be poised for a sharp price correction in the coming months, according to an analysis of its performance against gold.

Veteran analyst Peter Brandt has highlighted a concerning fractal pattern. The Bitcoin-to-Gold ratio (BTCUSD/GC1!) has recently climbed into a key resistance zone between 34 and 37, a level historically associated with local market tops. Simultaneously, the weekly relative strength index (RSI) for this ratio has breached the overbought threshold of 70, suggesting potential overextension.

Historical Precedents

• March 2024: Bitcoin peaked near $74,000 as the Bitcoin-to-Gold ratio hit the 34-37 resistance zone, accompanied by an overbought RSI. A 33% correction followed.
• 2021-2022: A similar price peak and overbought RSI in the Bitcoin-to-Gold ratio preceded a 75% decline from Bitcoin's all-time high of $69,000.

These historical precedents suggest that the current overbought conditions in the Bitcoin-to-Gold ratio may signal an impending correction.

Potential Downside

If a correction ensues, Bitcoin could potentially test its 50-week exponential moving average (50-week EMA), a key support level. This could translate to a price decline of around 30-35%, potentially bringing Bitcoin down to the $65,000 - $69,000 range.

Upside Potential

Conversely, a breakout above the current resistance level of around $102,000 could set the stage for a rally towards $150,000, aligning with numerous bullish BTC predictions.

Conclusion

While the recent rally has been impressive, the historical data suggests that a correction may be imminent. Investors should exercise caution and consider potential downside risks.

December 2024, Cryptoniteuae