Bitcoin, despite a 10% increase since January, may face a major correction as gold outperforms with annual gains of 20%. This inverse dynamic between the two assets raises fears of an imminent reversal in the crypto market.
As the US dollar reaches a 52-week high and 10-year bond yields cross 4.80%, an unusual occurrence is observed in the financial markets. Gold prices are rising despite the high dollar values, which typically have an inverse relationship.
This trend is further highlighted by the resilience of gold prices amidst market turbulence, such as the concerns over AI DeepSeek this week. “Gold prices are rising despite the volatility of the S&P 500 and the strength of the dollar,” notes Ali K. Kobeissi in The Kobeissi Letter on January 28, 2025.
Moreover, gold is experiencing strong demand as a safe haven asset, while Bitcoin's gains are notably slower. Data from Cointelegraph Markets Pro and TradingView shows a 10% increase in BTC since January, compared to gold's 20% gains.
This divergence raises concerns among traders, especially considering the technical analysis of the Bitcoin/gold ratio. As the Northstar account on X highlights, if the ratio falls below 34, it could mark the end of the upward trend. This level is closely monitored as the ratio reached historic highs in December 2024.
However, some experts, like Michaël van de Poppe, remain optimistic, suggesting that Bitcoin will eventually follow gold to new highs, a trend observed previously with a lag of several months.
Currently, the BTC/XAU ratio is consolidating, and a break below 34 could signal the end of the bullish cycle. On the other hand, holding above this threshold would strengthen the positive momentum for a few more weeks or months.
As gold demonstrates exceptional resilience and Bitcoin faces a critical juncture, influenced by Arizona's initiative to allocate public funds to the asset, investors should closely monitor technical signals that could indicate a market reversal.
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