Bloomberg Cites Correlation Between Bitcoin and Gold Price, Stating BTC Is Currently Undervalued

UTC by Steve Muchoki · 3 min read
Bloomberg Cites Correlation Between Bitcoin and Gold Price, Stating BTC Is Currently Undervalued
Photo: Depositphotos

Bloomberg suggests that Bitcoin price is sixfold that of gold per ounce. It further cited that Bitcoin is undervalued under prevailing conditions.

As the global market slowly recovers from the coronavirus market crisis, the perceived safe havens including precious metals and Bitcoin are gaining traction at a much faster rate. In a report published by the media outlet Bloomberg, it indicated that the Bitcoin price has been rallying six times the market price of gold per OZ.

At the time of writing, Bitcoin price was trading around $11,664 with the likelihood of breaking out to the upside. On the other hand, the market price of gold per OZ was trading at around $2051, which is its all-time high.

“Stabilizing at about 6x the per-ounce price of gold, Bitcoin’s increasing correlation and declining volatility relative to the precious metal indicate an enduring relationship for price advancement, in our view. Unparalleled global central-bank easing should remain a tailwind for the quasi-currencies,” Bloomberg stated.

Essentially there has been no prior correlation between the two assets but the figures so far seem supportive.

Putting the theory into perspective, with the gold market price anticipated to hit $3000 level, Bitcoin price will certainly be approaching its all-time high.

Correlation Between Gold and Bitcoin Price

Gold has for long been used as a hedge factor against falling global economies and depreciating fiat value. It is mostly purchased by different central banks as a store of value. This makes its value ever-rising despite the global market turmoil. Its supply remains controlled by miners and the world reserves. This makes it a precious commodity with a finite supply.

Similarly, the Bitcoin market supply is largely controlled by virtual miners. In addition, the asset has a finite supply as there are only 21 million Bitcoins to ever exist in its lifetime.

Bitcoin price is largely supported by institutional investors including financial institutions, hedge fund managers, and also retail investors. Its market price has been stabilizing due to the introduction of future contracts that save investors from a lot of speculative trading. These make the two instruments highly valuable especially with the unprecedented nature poised by the coronavirus pandemic.

In addition, Bloomberg also believes there is an on-chain indicator that backs up the idea that Bitcoin is currently undervalued.

“The 30-day average of addresses from Coinmetrics on Aug. 4 translated to a Bitcoin price above $14,000, vs. about $11,000 on an auto-scale basis since 2017,” it stated.

With the continued investment from institutions like Grayscale that has been accumulating almost a third of mined BTC in the past few months, Bloomberg believes the price is poised to skyrocket if all underlying factors prevail.

The media outlet added that something unexpected would need to happen to prevent Bitcoin’s advance in the face of prevailing “zero and negative interest rates”.

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Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies. Mythology is my mystery! "You cannot enslave a mind that knows itself. That values itself. That understands itself."

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