Following the ongoing bullish bitcoin price momentum, it is crucial to look at other markets. While some believe Bitcoin to be the “digital gold, the precious metal isn’t doing too well. The Bitcoin-to-gold ratio keeps rising in favor of the world’s leading cryptocurrency.
Bitcoin and Gold in 2020
It is often interesting to compare two completely different markets with somewhat similar appeal. Both gold and Bitcoin cater to those who seek long-term investment options capable of retaining their value or even going up in price. Although both assets have very different market performances, they often seem to cater to the same “type” of investor.
Despite the stellar year gold had in 2020, its momentum continues to wane. Looking back at the past 12 months, gold’s overall uptrend remains visible but seems to hit a glass ceiling of sorts. Ever since surpassing the $2,000 per ounce level, bullion has not been able to get back in that range. Its current price of $1,914 per ounce is still respectable, given how it traded over $500 lower in March 2020.
It has to be said, gold’s early uptrend in 2020 hurt the Bitcoin-to-gold ratio. At certain times, it almost looked as if bullion would come out on top for a more extended period. When Bitcoin dropped to $3.800, traders were genuinely worried about the future. Today, all of those concerns are gone. Bitcoin affirms its dominant position in the cryptocurrency space, but also over gold.
What makes this rise all the more interesting is how Bitcoin
continues to push higher. It does so more efficiently than gold or other precious metals. That is remarkable, but not entirely unusual either. The volatile nature of Bitcoin can yield significant losses but also stellar gains. Over the past few months, the bulls have taken control of the market and continue to push for new highs.
Bitcoin-to-Gold Ratio Surpasses 20
When directly comparing the performance of Bitcoin and gold, it is best to evaluate the Bitcoin-to-gold ratio. It depicts how many ounces of bullion one can buy for the price of 1 BTC. In March of 2020, one could buy 3.5 ounces of gold per BTC. Today, things look very different.
At a current rate of 20, it is possible to buy 20 ounces of gold per Bitcoin. The Bitcoin-to-gold ratio has never come close to this level, let alone surpass it. Judging by the current market momentum, the Bitcoin-to-gold ratio is likely to keep trending higher. Reaching a ratio of 25 before the end of January 2020 is not unlikely, given the current circumstances.
Some people will argue this makes Bitcoin a better investment than gold. From a purely monetary gains perspective, that certainly seems to be the case. However, there may be different reasons why people feel more comfortable investing in gold compared to Bitcoin. Having both in one’s portfolio can never hurt, as diversification remains crucial.