Bitcoin’s price correction from its record high of around $ 42,000 in early January looks eerily similar to Spot Gold’s in August 2020.
In retrospect, the precious metal rose to its all-time high of $ 2,075.28 on January 8th. Its wild upward movement prompted traders to lock in profits.
As a result, the XAU / USD rate began to correct downward in the later sessions. The pair formed a support area between $ 1,847 and $ 1,863, which it eventually broke in late November, falling to $ 1,764.
Marc Principato, CEO of the digital company Green Bridge Investing, highlighted the growing influence of gold on the Bitcoin Future market in a note published on Sunday. Just like the precious metal, the flagship cryptocurrency formed a consolidating descending channel pattern after making its record high, causing Principato to see BTC / USD at $ 27,500.
„If 27.5K is at risk, for our strategy, it means that wider consolidation is likely to be in play,“ he added. “If you want to get a better idea of what this scenario might look like, check out XAUUSD from August through December. This is NOT a prediction; it is a potential scenario to prepare for if Bitcoin decides to go that route. “
So it seems that halfway through Bitcoin copied the gold market moves of 2020. The cryptocurrency is now testing the range between $ 30,774 and $ 30,188 for a potential breakthrough towards the downside support target. Worryingly, this level could be anywhere near $ 27,700 or $ 23,500.
„The 27.5K to 32K range so far has proven to be supportive,“ remembers Principato nonetheless
“On the daily timeframe, a failed low formation is in play while at the same time a new sell signal is about to be confirmed. As long as 27.5 holds, there is a likelihood of a bullish breakout in the short term. This can take place in the next one to two weeks, ”he adds.
The analogy is reminiscent of the rebound in gold after hitting $ 1,764 in November. As the precious metal moved back up, it regained support between $ 1,847 and $ 1,863, then hit a new daily high of $ 1,959.
Nonetheless, it is now consolidating within the same area.
Bitcoin makes important comparisons to gold because of its safe-haven, anti-inflation, and anti-fiat narratives. Many analysts, including strategists from JPMorgan and Guggenheim Partners, believe that the cryptocurrency could displace part of the gold market in the future because millennials would rather buy Bitcoin than gold.