In a significant shift, Bitcoin (BTC) is showing signs of a bullish trend against gold, retracing to levels last seen in 2017, 2022, and 2023. Analysts are calling this a critical moment, describing it as an ‘opportunity within risk.’ The Bitcoin-to-gold ratio is gaining strength, as evidenced by a bullish divergence with the Relative Strength Index (RSI) on the daily chart, a technical indicator that signals fading selling pressure.
Bullish Divergence and Market Support
According to Michaël van de Poppe, founder of MN Capital, the Bitcoin-to-gold ratio has formed a bullish divergence, where the price has formed lower lows, but the RSI has formed higher lows. This setup is often a strong indicator of a potential trend reversal. In February, the ratio retraced to a key support level near 12-13, a level that previously acted as resistance in 2017 before becoming support in 2022 and 2023. This level may now serve as a potential bottom for Bitcoin’s long-term trend against gold.
ETF Flows Highlight Institutional Interest
The shift in ETF flows further supports this bullish outlook. The U.S. gold-backed ETF, SPDR Gold Shares (GLD), recorded a massive $3 billion outflow on March 6, a figure that surpasses any previous large daily outflow seen over the last two years by 200%, according to the Kobeissi Letter. Meanwhile, the 30-day change in Bitcoin ETF flows improved to $906 million in net inflows on March 11, up from a $1.9 billion outflow a month earlier.
Macro Volatility and Institutional Expansion
Binance Research notes that the current macro volatility presents an ‘opportunity within risk’ for Bitcoin. The report highlights that Bitcoin has moved similarly to macro assets like oil and U.S. equities amid geopolitical tensions, such as the U.S.-Israel and Iran conflict. Despite this volatility, capital is starting to return to Bitcoin, with the share of Bitcoin trading volume from U.S. spot ETFs increasing, signaling rising institutional activity.
However, ETFs still represent only around 9% of total BTC spot trading volume, significantly below the 30-40% ETF-to-total equity trading volume in U.S. equity markets. This suggests substantial room for institutional expansion. Historically, periods of geopolitical turmoil have often been followed by strong recoveries. For example, U.S. midterm election years have seen market drawdowns with the S&P 500 averaging a 16% peak-to-trough decline. Bitcoin has historically fallen around 56% during these cycles. However, the 12 months following midterm elections have never produced a negative S&P 500 return since 1939, averaging gains of 19%, and Bitcoin has rallied an average of 54% in all three post-midterm years on record.
Looking Forward
The $78,000 level is now key to a potential broader trend change in the BTC market. As macroeconomic conditions and geopolitical events continue to influence the market, the current divergence and ETF flow trends suggest that Bitcoin could be on the verge of a significant recovery. Investors should remain vigilant and conduct thorough research before making any investment decisions, as the market remains volatile and subject to rapid changes.
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