Bitcoin‑to‑Gold Z‑Score Suggests a “Major” Rally Could Be Imminent, Says Analyst
Samson Mow, chief executive of Jan3, points to a deep undervaluation of Bitcoin relative to gold and the global money supply, using a statistical measure that has foreshadowed past price surges.
What the metric measures
The “Z‑score of the Bitcoin‑to‑gold ratio” quantifies how far the current price relationship between BTC and gold deviates from its historical average. A Z‑score of 0 indicates the ratio is exactly on its mean; positive values mean Bitcoin is priced above the average relative to gold, while negative values show it is priced below.
Mow highlights that a Z‑score falling below ‑2 has historically preceded what he calls “major” Bitcoin rallies. The current reading sits around ‑1.24, still well beneath the long‑term average but not yet in the critical zone that previously preceded explosive gains.
Historical context
Two notable episodes illustrate the predictive power of the metric:
| Period | Z‑Score dip | Subsequent Bitcoin performance |
|---|---|---|
| November 2022 | Dropped below ‑3 amid the collapse of the FTX exchange | BTC rallied more than 150 % over the following 12 months |
| March 2020 (COVID‑19 crash) | Fell beneath ‑2 as markets stalled | Bitcoin surged over 300 % in the next year, hitting an all‑time high of roughly $69 000 by November 2021 |
In both cases, the deep negative Z‑score was a warning sign that the crypto asset was considerably cheaper than its historic gold‑adjusted benchmark, setting the stage for a strong rebound.
Current market snapshot
- Bitcoin price: ≈ $66 400, modestly higher than the recent low of $60 000 after a 50 % drawdown from its peak.
- Gold (April futures): $5 247.90 per ounce.
- Tokenized gold (PAX Gold USD): $5 404.14.
Mow argues that, relative to these gold levels and the overall global money supply, Bitcoin appears 24 %–66 % below its expected trend line. He contrasts this with gold, which he describes as “over‑extended,” suggesting a potential re‑balancing in favor of the digital asset.
Contrasting viewpoints
Not all market participants share Mow’s optimism. Several analysts forecast further downside for Bitcoin, citing:
- Ongoing geopolitical uncertainty and inflation pressures.
- A possible “bear market” echo of the 2022 correction, with price targets around $50 000.
These more bearish projections stress that the current price action could be a continuation of the previous bear cycle rather than the start of a new bull run.
What the Z‑Score could mean for traders
- Watch the threshold: A move below ‑2 would align with past rally triggers; traders might watch for a breakout in the BTC‑to‑gold ratio as a leading indicator.
- Consider cross‑asset dynamics: The divergence between Bitcoin’s undervaluation and gold’s relative overvaluation may prompt capital flows toward crypto, especially if macro‑economic conditions keep real yields low.
- Risk management: While the historical record is compelling, the metric is not a guarantee. Market sentiment, regulatory developments, and macro‑economic shocks could still impede a rally.
Key takeaways
- Metric focus: The Z‑score of the Bitcoin‑to‑gold ratio is currently at ‑1.24, still below the long‑term average but not yet in the “major rally” zone of ‑2.
- Historical precedent: Past periods where the Z‑score slipped below ‑2 or ‑3 were followed by large, sustained Bitcoin price gains.
- Analyst split: Samson Mow views the current undervaluation as a bullish signal, whereas other analysts see the crypto market as still vulnerable to further declines.
- Potential catalyst: A continued slide in the Z‑score could ignite the kind of reallocation that has historically driven Bitcoin’s next significant rally.
As the market digests both the statistical indicator and broader macro factors, the coming weeks will be crucial in determining whether Bitcoin’s relative cheapness translates into the “major” upside that Mow anticipates.
Source: https://cointelegraph.com/news/bitcoin-undervalued-gold-potential-rally?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
