Bitcoin undervalued relative to gold signals potential rally: Analyst

Bitcoin (BTC) is relatively undervalued compared to gold and the global money supply, which could signal a price reversal, according to Samson Mow, the CEO of Bitcoin technology company Jan3.

“Bitcoin is about 24%-66% below its trend relative to gold's market cap or global money supply, while gold is overextended,” Mow said in a Saturday post on X.

Gold futures for April delivery closed Friday at $5,247.90; Tokenized gold PAX Gold USD was trading at the time of writing at $5,404.14.

Mow also cited Bitcoin’s Z-score, a metric that tracks how close the price of BTC is to its historic average. A Z-score of 0 indicates that the price is in line with the average, while a Z-score above 0 indicates that the price is moving above average levels.

The Z score of the Bitcoin-to-gold ratio. Source: TradingView

A score below 0 signals that the price is trading below the average. When the Z score of the Bitcoin-to-gold ratio drops below -2, Bitcoin has experienced “major” price rallies, Mow said. The Z score of the BTC-to-gold ratio is about -1.24 at the time of writing.

Data from TradingView shows that the metric dropped below -3 in November 2022, amid the collapse of crypto exchange FTX and the price of BTC rallied by over 150% over the next 12 months.

Earlier, a similar pattern played out during the Covid crash in March 2020, when the metric fell below -2 and Bitcoin reached a low of about $3,717. Bitcoin surged by over 300% in the following 12 months, and by November 2021, BTC reached what was then the all-time high of about $69,000. 

Related: Bitcoin traders eye Iran reactions as oil sparks US 5% inflation forecast

Bitcoin to crash to $50,000?

The analysis from Mow is a contrarian view to other analysts, who forecast more pain ahead for the crypto market and a further drop in Bitcoin prices due to investor uncertainty and geopolitical tensions. 

The price of BTC may be headed toward $50,000, according to crypto market analysts, who say that price action may be mirroring the 2022 bear market.

Bitcoin fell by over 50% from peak to trough, to a low of $60,000, before staging a limited recovery to current levels of near $66,400 in the wake of this weekend’s developments in the Middle East.

Magazine: Bitcoin to see ‘one more big thrust’ to $150K, ETH pressure builds: Trade Secrets