“Bitcoin is digital gold” is one of the most popular narratives in the cryptocurrency industry, reiterating BTC’s growing status as a formidable store of value. However, while the leading cryptocurrencies have languished over the past few months, the gold and metals market has largely witnessed explosive growth.
These contrasting performances have led to conversations about capital turnover between Bitcoin and gold, as we expect one to consistently outperform the other at any given time. However, recent data suggests that the relationship between BTC and gold price movements is overestimated.
The capital flow link between BTC and gold is overvalued
In a January 24th post on the X Platform, an on-chain analyst who goes by the pseudonym Darkforst opined on the debate surrounding capital rotation between gold and Bitcoin. Market experts say the idea that investor money will flow from gold to Bitcoin is somewhat exaggerated.
To highlight this overvaluation, Darkforst shared a chart showing periods in which BTC will outperform or underperform depending on gold trends. This chart typically provides two signals: positive (BTC is above the 180-day moving average (MA) and gold is below the 180-day moving average) and negative (BTC is below the 180-day moving average (MA) and gold is below the 180-day moving average).
As observed in the chart above and stated by Darkhost, the relationship between Bitcoin and gold does not seem to be fully substantiated. On-chain analysts revealed that there were as many positive periods as negative periods, suggesting that the flagship cryptocurrency is moving independently of gold.
Darkforst writes:
This suggests that BTC continues to evolve on its own, even without clear evidence of sustained capital turnover from gold.
Furthermore, Dirkforst pointed out that a positive signal does not necessarily mean capital is flowing out of gold and into Bitcoin. According to on-chain analysts, it is simply impossible to determine whether there is a capital flow relationship between the world’s largest cryptocurrency and gold.
Bitcoin and Gold Price Overview
Bitcoin started the new year pretty well, but the bullish momentum has largely faded over the past two weeks. Meanwhile, gold prices have continued to perform well this year, recently hitting a new all-time high of over $4,900 per ounce.
As of this writing, the price of BTC is around $89,230 with no significant movement in the past 24 hours. The flagship cryptocurrency is nearly 30% off its all-time high above the $126,000 level, according to CoinGecko data.
The price of BTC on the daily timeframe | Source: BTCUSD chart on TradingView
Featured image from iStock, chart from TradingView
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