Bitcoin may be experiencing a decline against more stable assets such as gold as investors shift appetite from risk assets amid economic uncertainties.
Bloomberg’s senior commodity strategist, Mike McGlone, recently suggested that Bitcoin could experience a decline in its valuation compared to gold, a traditional safe-haven asset.
This analysis from the market technician comes at a time when investors seem to be shifting away from high-risk assets in favor of more stable options, as the risk of economic tensions worsens.
Bitcoin’s Peak and Its Reversion Against Gold
According to McGlone, the Bitcoin/Gold ratio recently reached its peak in March 2024. This surge was fueled by investor enthusiasm over the introduction of Bitcoin exchange-traded funds (ETFs) and favorable market conditions.
Bitcoin|Gold Chart | Bloomberg Intelligence
For context, within this period, Bitcoin spiked 184% from $25,927 in September 2023 to its all-time high of $73,794 in March 2024. The rally mirrored broader risk-on sentiment in the financial markets, with Bitcoin vastly outperforming gold during this period.
However, the tide is turning. Bitcoin has begun to lose momentum, steadily retreating against gold. Interestingly, BTC has slumped 34% from its peak against gold in March, now trading for 22.42 ounces. Currently, the ratio has already fallen below key levels.
BTCAUXT 1M Chart
Notably, McGlone believes this decline could continue, with Bitcoin possibly reverting to a historical low of 15x compared to gold. This sentiment aligns with projections of a BTC drop to $31,500.
McGlone attributed this reversal to several factors, including the tapering of speculative behavior in financial markets.
As central banks tighten monetary policy and liquidity drains from the market, risk assets like Bitcoin are losing favor. Gold, which traditionally performs well in periods of economic uncertainty, may become a more attractive option for investors seeking stability.
A Broader Look: Bitcoin v S&P 500
In a separate analysis, McGlone discussed Bitcoin’s performance against the S&P 500. The Bitcoin/S&P 500 ratio, which peaked at 21x in 2021, has steadily declined to 10x as of September 2024.
Bitcoin/S&P 500 May Revert Toward 7x – At 10x on Sept. 12, the S&P 500 may be heading toward 7x vs. #Bitcoin. Peaking at 21x in 2021, Bitcoin/SPX first traded at 7x at the end of 2017 with the launch of listed Bitcoin #futures — and the graphic shows what looks like the process… pic.twitter.com/iWiVcxm1Ik
— Mike McGlone (@mikemcglone11) September 13, 2024
Again, this decline is a reflection of the broader market situation where high-beta, high-risk assets like cryptocurrencies and tech stocks have suffered as liquidity fades.
McGlone indicated that the ratio could fall even further, possibly reaching 7x, a level last seen in 2017 during the launch of Bitcoin futures. This would mark a significant shift in investor sentiment.
As risk appetite wanes, traditional stocks and even Bitcoin, which once outpaced the broader market, are losing their appeal. Investors seem to be rotating away from speculative assets in search of safer investments.
In parallel, the S&P 500’s performance relative to gold is also declining. The S&P 500/Gold ratio could revert to 2x, McGlone predicts. Currently, Bitcoin now trades for $58,035, down 1.49% this month but still up 9% against gold this year.
