Breaking Bitcoin's Final Barrier? Keeping an Eye on the BTC-Gold Ratio

Moomoo News Global joined discussion · Apr 9 07:54

With its unique digital characteristics and scarcity, Bitcoin is often touted as "digital gold", while traditional gold is widely recognized for its stable physical value and safe-haven status.

Since the start of the year, Bitcoin has seen a persistent increase in value, briefly surpassing the $73,000 threshold and achieving a 58% gain, thus marking a new all-time high against the US dollar. In parallel, amidst heightened geopolitical risks, accumulative purchases by central banks, and currency devaluation, $Gold Futures(JUN4)(GCmain.US)$ has risen 13% this year, breaking the $2,300/oz barrier and consistently setting new historical records.

The concurrent rallies of Bitcoin and gold have turned the spotlight on the Bitcoin-to-gold ratio, which has now ascended to around 30, nearing its 2021 peak of 37 times. This development has sparked lively market discourse and conjecture regarding Bitcoin's future status and trajectory.

Breaking Bitcoin's Final Barrier? Keeping an Eye on the BTC-Gold Ratio

Keep an Eye on When the Bitcoin-to-Gold Ratio Hits a New Peak

The Bitcoin-to-gold ratio is commonly used to measure the value of Bitcoin relative to gold, the traditional safe-haven asset. Since both Bitcoin and gold are considered stores of value, investors and analysts often use this ratio to compare their relative performance and gauge market sentiment during specific periods.

In 2021, the Bitcoin-to-gold ratio peaked at 37 times when Bitcoin reached a historic high of nearly $65,000 in April, while gold experienced a year of fluctuating trends. With Bitcoin's robust rise this year, the ratio has approached these previous highs.

Bears maintain that this ratio may never reach new heights. Peter Schiff, known as a gold acolyte, wrote in a note on X, "While Bitcoin made a new high priced in dollars, it failed to make a new high priced in gold. Perhaps it never will. That undermines the case for Bitcoin being digital gold." Conversely, bulls argue that a new high would cement the status of Bitcoin as "digital gold", potentially propelling the momentum of its market movement even further.

Why Do People Refer to Bitcoin as "Digital Gold"?

For a long time, individuals have looked for assets that are not subject to government control, and gold has served this purpose for many centuries. Bitcoin is often referred to as "digital gold" because it shares certain attributes with gold while also possessing unique characteristics. These are the main points of comparison:

1. Safe-Haven Asset: Gold is traditionally seen as a safe-haven asset during periods of economic uncertainty or monetary instability. Similarly, some investors view Bitcoin as a hedge against traditional financial market risks and inflation.

2. Store of Value: Gold has long been regarded as a store of value, maintaining its worth across different eras and economic cycles. Bitcoin's supply is capped at 21 million coins, and this scarcity endows it with the potential to act as a store of value, akin to gold.

3. Decentralization: Gold is naturally decentralized, scattered across the globe, free from control by any central authority. Bitcoin is similarly decentralized, operating on a distributed ledger technology (blockchain) and independent of any single management entity or government.

Despite Bitcoin's "digital gold" properties, it also faces challenges and risks, including high price volatility, limited market acceptance, regulatory uncertainty, and security concerns related to its technology. Market predictions for Bitcoin's price vary widely, with analysts' forecasts ranging from $43,000 to $150,000, reflecting significant uncertainty about its future performance. Marion Laboure, Analyst at Deutsche Bank Research, said in a note,

I could potentially see Bitcoin to become the 21st century digital gold. Let’s not forget that gold was also volatile historically. But it is important to keep in mind that Bitcoin is risky: it is too volatile to be a reliable store of value today. And I expect it to remain ultra-volatile in the foreseeable future.

Bitcoin Halving Is Around the Corner

The Bitcoin network has undergone three halvings, occurring in 2012, 2016, and 2020. Historical patterns suggest that each halving, which reduces the new supply of Bitcoin to the market, often precedes a significant price rally for the cryptocurrency.

While the halving event itself doesn't directly cause the price to soar, it is widely regarded as both a psychological and technical milestone that can notably influence market sentiment and investor behavior. Anticipation is building asinvestors approach the fourth Bitcoin halving on April 19th, now just 10 days away, with the market closely monitoring the potential impact of this pivotal event.