Bitcoin is “eating” Gold: GOLD/BTC ratio falls to an all-time low
The yellow metal has now fallen to its lowest-ever value against Bitcoin, the digital gold, in terms of the ratio.
What just happened?
Simply put, the “Gold/Bitcoin” ratio calculates the price value of the yellow metal against Bitcoin. A 1:1 ratio means both gold and Bitcoin are valued at the same price by the open market, while a ratio of 2:1 would mean the market values one asset (say, gold) at twice the prices of Bitcoin.
What’s happened in the past months is the complete opposite. Bitcoin moved from the $5,000 price level in mid-April to over the $52,000 level yesterday—a 10x increase since that time and more than a 2.5x increase since its previous all-time high of $20,000 in December 2017.
In the same period, gold moved from the $1,600 price level to the current $1,800 price level (while temporarily reaching a previous high of $2,000 in August 2020). As the below chart shows, the metal is now in a downtrend, trading below its 34-period moving average while forming lower highs and lower lows.
Such a move brought the GOLD/BTC ratio lower and lower, meaning if one were to bet against gold in the past year—they would have ended up with a lot of BTC. Data also shows that it has reached the lowest possible level ever (the downtrend started back in September).
— Holger Zschaepitz (@Schuldensuehner) February 17, 2021
Choosing Bitcoin over gold
Michael Saylor, the CEO of business analytics software maker MicroStrategy, claimed on Twitter that their historic move into Bitcoin in August was around the time that gold “peaked” out. “Gold peaked in August 2020 at the same time MicroStrategy chose #Bitcoin as the superior asset,” Saylor said in a tweet.
MicroStrategy made headlines at the time after announcing it purchased over $350 million worth of Bitcoin—a move meant as a hedge against a falling economy and to seek superior returns from a global asset.
The firm has since purchased more than a billion dollars worth of Bitcoin over separate instances. And it is not done yet: This week saw MicroStrategy offer a mammoth $900 million convertible bond offering to institutional investors interested in BTC investments.
Some crypto-focused investment funds saw that such moves are only beginning, especially as an alternative to gold.
“We are reaching the world-historical epochal levels now where multi-B trend-following CTA funds who rule the CME will be buying $BTC / selling gold on max size,” said Su Zhu, the founder of Singapore-based Three Arrows Capital, in a tweet today.
We are reaching the world-historical epochal levels now where multi-B trendfollowing CTA funds who rule the CME will be buying $BTC / selling gold on max size
Respect the trend
— Su Zhu (@zhusu) February 18, 2021
Gold still has its own legion of loyal supporters, however.