Bitcoin Hits Critical Level Against Gold After Falling Channel Breakout: Peter Brandt

Bitcoin performance relative to Gold reaches an important juncture, according to a recent analysis from market veteran Peter Brandt.

Notably, his latest analysis of the Bitcoin/Gold (BTCXAU) ratio reveals a notable test for Bitcoin at the 36 to 37.1 ounce (oz.) level. For context, this area is proving to be a significant resistance zone, following a sharp breakout from a falling channel.

Brandt’s chart, which spans a weekly timeframe, captures the market condition with historical context. In late 2018, BTC formed a wedge pattern against Gold, with higher lows and resistance at 7 XAU.

However, by early 2021, the ratio surged, breaching the 7 XAU resistance, and eventually reaching an all-time high of 37 XAU in March. This rally, propelled by Bitcoin’s bullish momentum during the 2021 bull run, marked the crypto firstborn’s dominance over Gold.

Bitcoin Continues to Face Resistance at 37 XAU

Nonetheless, after hitting this peak, a pronounced correction unfolded, which ended in mid-2023. After a breakout, BTC surged to retest the 37 XAU mark in March 2024 but faced another rejection, leading to a descending channel pattern.

The most recent development is the breakout above the channel as BTC recovered in early November to claim $100,000 following Donald Trump’s election victory.

The Bitcoin/Gold ratio surged to again retest its historic peak at 36 to 37 oz. However, it is again facing resistance at this point. This important resistance zone has become the focal point for traders and investors, as a decisive breach could indicate further upside potential.

The latest roadblock questions Bitcoin’s ability to maintain its relative outperformance against Gold. If the resistance holds, the ratio may enter another consolidation phase. However, on the downside, BTC could find support at the 8-week SMA of 32.56 oz.

Implications of Crypto Dollar Dominance

Meanwhile, Mike McGlone, Bloomberg’s Senior Commodity Strategist, has also discussed the correlation between Bitcoin, Gold, and the broader market.

He highlighted the proliferation of stablecoins like Tether, which now boasts a $137 billion market cap. McGlone suggests that this trend shows increasing dollar dominance, a development with implications for commodities and Gold.

A $137 Billion Tether? Bitcoin vs. Gold, the Dollar, Commodities – The proliferation of #stablecoins could portend increasing #dollar dominance, with headwind implications for #commodities and old analog #gold vs. the digital version. What we call crypto dollars, Tether is the… pic.twitter.com/T5XKgdS2ix

— Mike McGlone (@mikemcglone11) December 9, 2024

McGlone’s chart shows the correlation between the Tether market cap, the US Federal Reserve trade-weighted dollar index, and the Bloomberg Commodity Spot Index.

Over time, the growing prominence of crypto dollars (dollar stablecoins) has supported the greenback, bolstering global dominance. This change has introduced headwinds for traditional commodities and Gold, which rely on broader economic and monetary conditions for their performance.

The chart reveals major inflection points, such as the dollar’s strength during periods of global instability, which coincided with downturns in commodities and gold. As stablecoins gain traction, Bitcoin could benefit from its association with the crypto ecosystem.