Bitcoin vs Gold: A Practical Guide to Ratio Analysis

In the world of market analysis, most investors instinctively look at Bitcoin through the lens of fiat currencies such as the US dollar. Kevin Wadsworth and Patrick Karim of NorthStar & BadCharts argue that this approach misses a vital part of the picture. When Bitcoin is priced in gold rather than dollars, the chart reveals broader capital flows and market conditions that remain invisible on a standard price chart.

Gold acts as a form of financial insurance and a benchmark for purchasing power. According to the experts, Bitcoin cannot be said to be truly in a bull market unless it is also outperforming gold. This means that even if Bitcoin appears strong in fiat terms, its real strength must be measured by whether it is able to buy an increasing number of ounces of gold. If Bitcoin fails to create higher highs and higher lows against gold, then the underlying trend remains weak.

At the time of the analysis, one Bitcoin equated to roughly 26 ounces of gold, down from levels as high as 30-38 ounces. Importantly, the chart shows a sequence of lower highs and lower lows, classic signs of a downtrend. For Bitcoin to reclaim bullish momentum, it would need to reverse this structure decisively.

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One of the key lessons is that investors should pay close attention to horizontal support lines. A horizontal level represents a previous swing low. If the Bitcoin/gold ratio closes below such a level, specifically around 25 ounces, it signals a new lower low. Combined with existing lower highs, this confirms an active downward trend.

Bitcoin enthusiasts may watch the USD price chart for breakout signals, but the experts stress that these signals lose significance if the Bitcoin/gold chart remains in decline. In other words, even strong rallies can be masking structural weakness once adjusted for the performance of gold.

One striking feature on the chart is a curved “dome”, highlighting an important concept: a long-term arc of resistance. As long as Bitcoin remains below this curvature, it is not in a confirmed uptrend against gold.

Previous cycles support this idea. When Bitcoin has broken above similar domes in the past, the subsequent rallies have been explosive. Until such a breakout occurs again, however, Bitcoin is more likely to move sideways or trend lower rather than accelerate into a sustained bull phase.

The analysts note that speculative assets tend to track broader risk-on flows, often behaving like an amplified version of highly leveraged indices. Because of that connection, a definitive breakout above the dome is not impossible, but the timing remains unpredictable.

When using a long-term moving average (eg the 36-week or longer) can be an excellent tool for distinguishing between long-term momentum and short-term noise. When Bitcoin’s ratio to gold rises strongly above this average, the distance indicator beneath the chart expands upward, signalling powerful upward momentum. This is typically where Bitcoin’s strongest multi-month rallies have emerged.

However, the opposite is currently true. The ratio is below the moving average, and the distance indicator is trending downward beneath a descending resistance line. Until price breaks above both the moving average and this descending line, Bitcoin lacks any technical confirmation of renewed strength.

The analysts repeatedly stress the importance of waiting for evidence rather than guessing at bottoms. If Bitcoin is below its moving average, below the Ichimoku cloud, and below the dome resistance, the weight of evidence argues against assuming a new bull phase.

Another important point is the high correlation between Bitcoin’s price in fiat and the Bitcoin/gold ratio. Because Bitcoin is more volatile than gold, both charts tend to move in the same direction. As a result, if the Bitcoin/gold ratio is falling, it is statistically more likely that Bitcoin’s fiat price will not sustain a major bull market either.

This makes the ratio a valuable lead indicator. By monitoring how Bitcoin behaves against gold, investors can gain early insight into whether a USD rally is meaningful or merely a temporary bounce.

Both Kevin and Patrick stress the importance of patience. They warn against attempting to predict bottoms in the ratio chart or treating normal oscillations as major turning points. Markets, they emphasise, need time to complete patterns. Bitcoin’s relationship to gold has been forming a large topping structure since 2024, and no one can say with certainty when it will resolve.

Only when Bitcoin breaks above the dome, above the moving average, and above the descending momentum line can investors begin considering whether a true trend reversal has begun. Until then, the chart offers no technical justification for assuming aggressive upside.

The key message from Kevin and Patrick is clear: Bitcoin’s strength cannot be assessed solely through its USD chart. When priced in gold, Bitcoin is still in a confirmed downtrend marked by lower highs, lower lows, and multiple layers of resistance. For a genuine bull market to emerge, Bitcoin must decisively break above major technical barriers and demonstrate sustained outperformance against gold.

While no one can predict the exact timing of such a breakout, understanding the Bitcoin/gold ratio offers valuable insight into the underlying forces shaping Bitcoin’s market trajectory. As with all markets, disciplined observation, not speculation, is what ultimately provides clarity.

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