At Six Times The Price of Gold, Bitcoin Still Remains Undervalued

With the global economy uncertainty just brewing further, the two most-watched assets currently in the market are gold and Bitcoin. Gold price has already crossed $2000 per ounce this week and has appreciated by more than 33% year-to-date.

On the other hand, Bitcoin - often referred as digital gold - is also making some big moves recently. In the last three weeks, Bitcoin (BTC) price has surged nearly 30% going from $9000 levels all the way to above $12,000.

At press time, BTC is trading at $11,897 with a market cap of $218 billion. In its recent edition of crypto outlook for August, Bloomberg said that Bitcoin will be contending at six time the price of gold per ounce. The Bloomberg speculation comes at a time when the correlation between the two assets have reached an all-time high.

With Bitcoin’s inherent characteristics like limited supply and low growth rate, Bloomberg professes that Bitcoin is on the verge of becoming Digital Gold. Taking the hypothesis even further, Bloomberg claims that there’s a price ration relationship between the two assets.

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,” concluded Bloomberg.

The concept of mathematical relationship between the two assets remains unclear. But if at all this relationship persists in the future, Bitcoin can appreciate close to $18,000. At the same time, the potential upside in spot gold can be as high as $300 per ounce.

Bloomberg also cites some on-chain indicator stating 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,” the publication wrote.

Additionally, Bloomberg cites that massive expansion of the Greyscale Bitcoin Trust Fund. With massive inflows over the last year, the Greyscale BTC Fund (GBTC) holds around a third of Bitcoin. “If the inflow pace doesn't subside, absorption will approach 50%, with less supply.”

With the interest rates going zero and even negative and the Fed printing more and more, inflation is likely to surge going further. Bloomberg is confident that these events will push Bitcoin price even higher.