Bitcoin undervalued compared to gold
Nikolaos Panigirtzoglou, global market strategist at JPMorgan, sparked a momentous debate. He argued that volatility-adjusted Bitcoin is currently trading at a discount to gold.
The gold bar and the crypto block are at the forefront of investors looking for protection against inflation and geopolitical uncertainties. Gold is in first place with its success story of over 5,000 years. But Bitcoin is already in second place after less than 20 years of success.
Bitcoin is the digital representative of safe investments, also referred to as “digital gold”; and this because of its definitely non-removable limit of 21 million tokens and decentralization as an additional advantage.
According to Panigirtzoglou, the recent decline von Bitcoin a 20% von 126,000 to under $100,000 triggered by a double strike.
First, there was a large wave of liquidations in highly leveraged perpetual futures.
Second, a massive spread $128 million exploit on the Balancer DeFi platform fear in the market. In short, too much leverage led to a major security hole.
However, the dark cloud has a small, shiny edge, according to JPMorgan. The bank, which has $3.7 trillion in assets under management, noted that the ratio between open interest in Bitcoin futures and market capitalization – a measure of leverage – has now normalized to its average level since January 2024.
Panigirtzoglou also pointed out that it minor Posts of Bitcoin spot ETFs. Like CNF reported,US Bitcoin ETFs lost almost $800 million net in the week ending in early November. BlackRock’s IBIT, considered the best-performing ETF, had outflows of nearly $150 million as of Oct. 31.
On the other hand, gold’s increasing volatility after crossing $4,000 has narrowed the risk gap between the two assets. The volatility ratio between Bitcoin and gold recently fell below 2.0, meaning Bitcoin now requires just 1.8 times as much risk capital as gold – a rare convergence that strengthens the case for Bitcoin’s relative undervaluation.
Panigirtzoglou’s analysis shows that Bitcoin could be undervalued by as much as $68,000 compared to gold on a volatility-adjusted basis. With a market cap of around $2.1 trillion, Bitcoin would need to rise by about two-thirds, or around $170,000, to catch up with the $6.2 trillion in private investments currently in gold through ETFs and physical holdings. His conclusion:
“After being $36,000 overvalued compared to gold at the end of last year, Bitcoin is now undervalued by $68,000.”
When writing this article it was Bitcoin price at 101,889.73, and gold was for Traded at $3,981.38 per ounce.
However, according to JPMorgan analysis, the recent slump could make Bitcoin one of the most attractive assets to end the year.
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