BTC-Gold Ratio Suggests Bitcoin Is At “Solid Support”

Director of Global Macro at Fidelity, Jurrien Timmertweeted his analysis of the current situation following the sell-off of Bitcoin in recent weeks.

Using a variety of metrics, in particular the Bitcoin-to-gold ratio, Timer concluded that Bitcoin is “at strong support” and “attractively priced.”

All of the above tells me that Bitcoin is not only strong support, but also an attractive value.

However, the optimism was tempered by a warning about equity correlation, which he said must confirm a rally or his analysis becomes invalid.

Lately, investors have given up on risk, choosing to flee to the “safety” of the dollar. The ripple effects have seen capital flight from risky assets, which continue to show hesitation.

And, with a global slowdown on the horizon, some say the dollar’s flight will only accelerate in the weeks and months ahead. As such, expecting Bitcoin to maintain current levels may be overly optimistic.

Bitcoin Gold Ratio Trends Down

In drawing his conclusion about maintaining current Bitcoin price levels, Timmer referred to several metrics. These were:

  • the growing dormant stream, which Timmer likens to a measure of BTC going from weak to strong hands.
  • the BTC demand pattern showing Bitcoin falling below internet and phone adoption rates.
  • price falling below Model S2F projection, which compares supply (or stock) to annual production (or mine production).
  • the number of hodlers (detained for more than 10 years) remaining stable at 13%.

But perhaps more importantly, Timmer also references the Bitcoin Gold Ratio, pointing out that the ratio is now at major support. According to the table below, currently, one BTC is equivalent to 15.3 ounces of gold. This has more than halved from November 2021, BTC’s all-time high.

Still, to further support his argument, Timmer points out that the “trendless Bollinger Band” is nearly two standard deviations below 0, implying that the ratio could be rising.

“At the same time, the trendless Bollinger Band shows that the ratio is now 2 standard deviations below the trend, which is a level that has contained the last 3 declines.

Bitcoin Gold Ratio Chart
Source: @TimmerFidelity on Twitter.com

The case against

Speaking to Stansberry Research, Gareth Holowaythe The CFO of InTheMoneyStocks.com, used technical analysis to make the case for further declines in Bitcoin price.

Holoway says nothing in the chart has changed, BTC needs to retest the 2017 high of $20,000.

“At the moment, nothing in the chart has changed, so twenty thousand is the high end of my target. Just to understand where it came from, it’s from the high of 2017. I believe we have to go back there.

Referring to the macro landscape, he mentions that this is the first time in Bitcoin’s history that it has faced a quantitative crunch. Thus, he concludes that a larger correction is about to occur.

Holoway states that the lower end of his prediction would see Bitcoin at $12,000. Holoway derived the forecast valuation by looking at the measured decline from the November 2021 high and applying the downside scale from the previous local high of $48,000.

Posted in: Bitcoin, Analysis

Sallie R. Loera