“Bitcoin is digital gold” is one of the most popular stories in the cryptocurrency industry, once again highlighting the growth of BTC as a powerful store of value. But while top cryptocurrencies have been sluggish over the past few months, gold and metals markets in general have witnessed explosive growth.
These contrasting performances have led to a conversation about capital circulation between Bitcoin and gold. Because the crowd expects one side to always perform better than the other at any point in time. However, recent data shows that the relationship between BTC and gold price movements is overestimated.
Capital Flow Link Between BTC and Gold Is Overrated
In a January 24 post on the X platform, an on-chain analyst using the pseudonym Darkfost weighed in on the discourse surrounding capital circulation between gold and Bitcoin. The idea of investor money flowing from gold to Bitcoin is somewhat overblown, according to market experts.
To highlight this overvaluation, Darkfost shared a chart showing the periods when BTC has outperformed or underperformed in line with gold’s trend. This chart generally gives two signals: positive (BTC above the 180-day moving average (MA) and gold below the 180-day MA) and negative (BTC below the 180-day moving average (MA) and gold below the 180-day MA).
As observed in the chart above and noted by Darkfost, the relationship between Bitcoin and gold appears to be completely unproven. The on-chain analyst noted that there have been as many positive periods as negative ones, suggesting that the flagship cryptocurrency moves independently of gold.
Darkfost wrote:
This means that BTC continues to evolve independently, with no clear evidence of ongoing capital circulation from gold.
Moreover, Darkfost pointed out that positive signals do not necessarily mean capital will flow from gold to 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 on a very strong note, but the bullish momentum has largely waned over the past two weeks. Meanwhile, gold prices have continued to rise this year, recently hitting an all-time high above $4,900 per ounce.
As of this writing, the BTC price is around $89,230, with no significant movement over the past 24 hours. The flagship cryptocurrency has surpassed the $126,000 level, down nearly 30% from its all-time high, according to data from CoinGecko.
The price of BTC on the daily timeframe | Source: BTCUSD chart on TradingView
Featured image from iStock, chart from TradingView
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