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As gold experiences its most significant downturn since 1920, bitcoin makes gains, surpassing gold’s performance and elevating the BTC to gold ratio by 30% since the onset of the Middle East conflict.
Key points:
- Gold has decreased by as much as 27% from its peak in January and is down approximately 12% since late February, marking its longest period of decline in over a century.
- Bitcoin remains above $70,000, causing the BTC to gold ratio to rise by about 30% from recent lows, indicating a resurgence in relative strength.
Gold is currently experiencing its longest decline in over 100 years, representing its worst period since February 1920, with a streak lasting 10 consecutive days, as per Katie Greifeld, a Bloomberg analyst.
The yellow metal has dropped as much as 27% from its all-time high in January, reaching a low of $4,090, where it found support at the 200-day moving average, a frequently monitored technical indicator that often suggests longer-term trend strength.
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Nevertheless, it has recovered approximately 2% in the last 24 hours, likely indicating the end of this downward trend. Since the escalation of the conflict in the Middle East at the end of February, gold has remained down about 12%.
On the other hand, bitcoin, often described as digital gold, is maintaining a position above $70,000, keeping the bitcoin to gold ratio just under 16 ounces. This ratio hit a low of around 12 ounces shortly before the conflict in the Middle East began, suggesting it has increased by about 30% from those lows, with bitcoin outperforming.
Charlie Morris, chief investment officer at ByteTree, remarked: “I recall the enthusiasm when 1 BTC first exceeded one ounce of gold in March 2017. Since that time, it has consistently established higher lows, attaining 2.7 oz in 2019, 3.4 oz during the pandemic-related crash in 2020, 9.1 oz following the FTX collapse, and 12.4 oz in February of this year. Currently, one BTC is valued at 16 ounces of gold. With gold appearing fatigued, we could reasonably anticipate a new all-time high exceeding 40 ounces in the forthcoming months or years.”
Historically, bitcoin has typically followed gold in market cycles. Gold tends to lead with an initial rally, subsequently consolidating, which allows bitcoin to catch up and surpass it.
While Bloomberg ETF analyst Eric Balchunas posits that bitcoin and gold are not inversely correlated, they are largely uncorrelated.
He notes that gold exchange-traded funds (ETFs) like SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) have experienced billions of dollars in outflows in the past week.
In contrast, bitcoin ETFs have seen approximately $2.5 billion in inflows this month, with only around $140 million in net outflows year-to-date, despite bitcoin being down about 20% during this timeframe.
