Latest data shows that Bitcoin is displaying initial signs of surpassing gold in the market, an opportunity based on historical returns during the U.S. midterm elections.
The long-term price trend of Bitcoin (BTC) compared to gold shows a bullish reversal after retreating to levels seen in 2017, 2022, and 2023. Analysts believe that this potential trend change is occurring simultaneously with 'opportunities in risk.'
Bitcoin-gold ratio shows a bullish divergence
Michaël van de Poppe, founder of MN Capital, pointed out that the Bitcoin to gold ratio has shown support after forming a bullish divergence with the Relative Strength Index (RSI) on the daily chart.
BTCUSD/Gold ratio daily chart. Source: X
Bullish divergence usually refers to when the price makes new lows, but momentum indicators such as the RSI show higher lows, suggesting that selling pressure is weakening.
In February of this year, this ratio fell back to the key support area of 12-13, which had previously served as resistance in 2017 and later turned into support in 2022 and 2023. Therefore, the current level may become a potential bottom for Bitcoin against the long-term trend of gold.
Bitcoin/Gold ratio monthly chart. Source: Cointelegraph/TradingView
Additionally, the changes in fund flows of Bitcoin and gold ETFs over the past month also support the aforementioned view.
For example, the SPDR Gold Shares (GLD) ETF in the U.S. recorded a $3 billion outflow on March 6. The Kobeissi Letter stated,
"This exceeds any single day large capital outflow record in the past two years, with an increase of up to 200%."
Gold ETF fund flow. Source: World Gold Council
At the same time, the fund flow change of Bitcoin ETF over 30 days improved to a net inflow of $906 million on March 11, showing a significant rebound from the $1.9 billion outflow in the previous month.
The positions calculated in native units also reflect another divergence. The 30-day balance of Bitcoin ETF improved from -34,197 Bitcoins to 12,909 Bitcoins, while the holdings of the gold ETF declined from about 1.4 million ounces on February 13 to about 608,500 ounces.
Macro factors provide a window of opportunity for Bitcoin
Binance Research pointed out that the current macro volatility may provide "opportunities in risk" for Bitcoin. The report states that BTC prices during the US-Iran war aligned with the trends of macro assets like crude oil and the US stock market, reflecting that global events are becoming key factors driving market trends.
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Despite significant volatility, capital is beginning to flow back into BTC. The share of US product spot ETFs in Bitcoin trading volume has recently risen, indicating increased institutional investment activity.
However, ETFs currently account for only about 9% of the total trading volume of Bitcoin spot, far below the 30% to 40% of total equity trading accounted for by ETFs in the US stock market, indicating that there is still considerable room for institutional expansion.
The returns of Bitcoin in the year before and after the midterm elections. Source: Binance Research
Historical data shows that periods of geopolitical turmoil often breed strong recoveries. For example, during US midterm election years, the market often sees pullbacks, with the S&P 500 averaging a maximum drop of 16%, while Bitcoin's historical maximum drop during the same period was about 56%.
However, since 1939, the S&P 500 has never recorded a negative return in the 12 months following midterm elections, averaging a 19% increase; Bitcoin has achieved an average increase of 54% after all three recorded midterm election years.
As Cointelegraph reported, the $78,000 level is now a key point for potential trend reversal in the BTC market.