Does the 6% fall in gold’s price boost Bitcoin’s ‘digital gold’ narrative?

Key Takeaways

Will gold’s cooldown boost BTC’s recovery?

This might be possible, especially if ETF inflows rotate from gold to BTC. 

What do experts think about gold outperforming BTC?

According to Bitwise’s CIO, BTC could have its ‘gold 2025’ moment if long-term holders’ selling pressure is fully absorbed by ETFs. 

After fronting a +30% run since August, gold faced a cool-off at $4.4k and slipped by 6% earlier this week.

The move helped the BTC/gold ratio extend its recovery by 8%. Notably, the ratio tracks the price performance of Bitcoin [BTC] relative to gold. 

In other words, the 8% bounce in the ratio hinted that BTC strengthened slightly against gold. However, will the shift extend itself even more and rally BTC higher as a ‘digital gold?’ 

Bitwise’s outlook on Bitcoin

According to Bitwise CIO Matt Hougan, gold’s price rally only exploded this year. However, central banks have been accumulating it aggressively since 2022.

He claimed that gold investors may have offloaded over the past two years, but seller exhaustion hit this year – Allowing the price to moon on the charts. 

According to him, BTC could follow a similar path. Long-term holders have been selling since July, selling to ETFs and corporate treasuries. Hougan added, 

“But at some point, as gold’s example suggests, those sellers will be exhausted. As long as the combination of ETF and corporate purchases persists, Bitcoin will have its “Gold 2025” moment.”

That being said, gold has raked in more ETF inflows from July to date. The inflows surged from $5 billion to over $35 billion, driving gold’s price from $3.2k to nearly $4.4k.

Over the same period, BTC bled as ETF inflows dropped from $20 billion to $8 billion, coinciding with what appeared to be a massive rotation from BTC to gold. 

During BTC’s outperformance, like in Q2, BTC ETFs attracted more inflows than gold. Hence, if gold records an extended pullback, BTC may regain the spotlight and print higher. 

Here, it’s worth pointing out that the weekly price chart for the BTC/gold ratio was also at an inflection point, at press time, and mirrored the aforementioned projection. In fact, since 2023, the BTC/gold ratio has held above the Moving Averages, with the ratio retesting the lower bound of the indicator. 

If defended, a rally would mean BTC’s outperformance with an immediate BTC/gold ratio target of 37 (46% potential gain).

That would imply about $150k per BTC if hit. However, whether the bulls will make such a move remains to be seen.