Bitcoin vs. Gold: Is the digital asset really overvalued?

The cryptocurrency market is facing a critical moment. Analyst Michael van de Poppe highlights an unusual metric: the (RSI) (Relative Strength Index) of Bitcoin versus gold has fallen below 30, an event that has only occurred four times in history. This rare extreme drop is seldom observed without significant consequences for the price.

The previous three occasions when this happened marked crucial turning points in the market. In 2015, it was the bottom of that year’s bear cycle. In 2018, it coincided again with key lows of the correction. In 2022, the pattern repeated when the market hit bottom once more. Each of these instances was followed by a prolonged recovery, suggesting that Bitcoin could be setting the stage for a major rebound.

Overvaluation and Asset Rotation Theory

According to van de Poppe, gold currently appears to be overvalued relative to Bitcoin. This does not mean that the precious metal has reached its all-time high, but rather that the relationship between the two assets shows a potential imbalance. His analysis suggests that a rotation of capital from gold into Bitcoin could be on the near horizon.

An additional technical indicator supports this view: the distance between Bitcoin’s price and its 20-week moving average is abnormally wide. Historically, when this gap expands so much, the market has responded with relatively quick recoveries. Currently, Bitcoin is trading around $91.58K, approximately 20% below its all-time high of $126.08K.

Recent Price Movements and Critical Levels

Bitcoin recently rejected the $90,000 level, triggering a decline that spread to other markets. Gold and the Nasdaq also experienced corrections simultaneously, reflecting broader risk aversion in global markets.

Van de Poppe identifies several technical levels to watch. A move above $88,000 would be a strong bullish signal that would restore traders’ confidence. If weakness persists, retracements could lead to $83,800 and even $80,500. The current macroeconomic environment complicates the outlook, with US unemployment data, inflation reports, and Bank of Japan rate adjustment expectations on the near horizon.

Glassnode notes that Bitcoin’s 14-day RSI has returned to neutral levels, while spot market conditions have deteriorated significantly. Trading volume has fallen to historically low ranges, and open interest in futures has decreased slightly. Long positions still exist but could become vulnerable if prices continue to decline.

Warning About Historical Drops

Veteran trader Peter Brandt issued an important warning: Bitcoin has broken its parabolic trend line. In previous bull cycles, similar parabola breaks preceded declines of up to 80% from the highs.

If that scenario were to materialize today, Bitcoin could fall to $25,240. However, the current context differs significantly from the past. Corporations and institutions have accumulated Bitcoin substantially. Corporate holdings increased from approximately 197,000 BTC at the beginning of 2023 to over 1.08 million BTC today, a 448% increase.

Researcher Axel Adler Jr. points out that Bitcoin is in a correction phase after three years of expansion. This new ownership composition, with greater institutional and long-term participation, could act as a buffer against severe drops, potentially limiting the decline below the historical 80% predictions.