While gold has posted sturdy gains, Bitcoin (BTC) continues to show major signs of weakness, with prices drifting towards lower support levels and currently approaching the closely watched $82,000 mark, a key point in determining the next major direction for the world’s largest cryptocurrency.
Against this background, market analyst Doctor Profit drew attention to what he describes as one of the most significant charts of the current Bitcoin cycle: the gold to bitcoin ratio (GOLD/BTC).
What does the gold to bitcoin ratio suggest?
According to to Profit, this chart has repeatedly provided reliable signals for the tops and bottoms of major markets. He noted that he first released this framework almost a year ago, highlighting a historical pattern where Bitcoin tends to peak when 0.02 BTC equals one ounce of gold and bottom when the ratio reaches 0.11 BTC per ounce.
Profit pointed out that this relationship occurred in the previous cycle, pinpointing Bitcoin’s high in 2021 and its low in 2022. He claims that the same pattern has repeated in the current cycle, claiming that Bitcoin’s recent high was near $125,000, when the gold-to-Bitcoin ratio once again reached 0.02.
The key question now is whether the market will again reach the 0.11 BTC per ounce level that has signaled a decline in the past bottom. Based on current prices, Profit has made calculations.
Assuming the gold price is around $5,500 per ounce, dividing that number by 0.11 puts Bitcoin at around $50,000. He noted that this result is in line with his broader expectations that Bitcoin’s cycle low could fall somewhere between $50,000 and $60,000.
He added that even more bullish scenario in the case of gold, the analysis continues to support his thesis. If gold were to rise to $7,000 per ounce, the same ratio would see Bitcoin bottom near $63,000. In his opinion, both scenarios support the view that gold will likely outperform Bitcoin in the coming months.
BTC Heading into a Late Cycle Bear Phase?
However, not all analysts share this bearish outlook for Bitcoin. Technical analyst Michael van de Poppe offers a contrasting perspective suggested that gold’s recent strength may be nearing exhaustion, potentially setting the stage for a renewed rotation of capital into Bitcoin.
Van de Poppe highlighted Bitcoin’s relative strength index (RSI) measured against gold on the weekly time frame, noting that it has hit an all-time low.
He says this suggests a sedate imbalance in valuations, with one asset appearing overextended in the brief term and the other deeply undervalued. He described the situation as part of the so-called “great turnover” phase. market cycle.
The analyst also pointed to Bitcoin’s Z-Score, a metric used to assess whether a cryptocurrency is overvalued or undervalued by comparing its market capitalization with its realized, volatility-adjusted capitalization.
According to van de Poppe current Z score for Bitcoin is lower than several major historical lows, including those recorded in 2015 and 2018, the Covid-19 crash of 2020, and the bear market low of 2022. He believes this signals that BTC is already deep in a bear market and may be approaching the final phase.
At the time of writing, BTC is trading at $83,435, with losses of 2.2% and 7% on a 24-hour and 7-day basis, respectively.
Featured image from DALL-E, chart from TradingView.com
