Key Takeaways
- Bitcoin trades at a discount to gold on a volatility-adjusted basis.
- October corrections were driven by futures deleveraging and DeFi exploits.
- Potential upside suggests Bitcoin could reach $170,000 to match gold’s private investment base.
Bitcoin vs. Gold: A New Valuation Perspective
The age-old debate between gold and Bitcoin as a store of value has taken a new turn. According to JPMorgan Chase, BTC now appears undervalued relative to gold, following a sharp 20% correction in October. Analysts suggest this could make the digital asset more attractive for investors seeking alternative hedges in uncertain markets.
Gold has long been the preferred safe haven, valued for its tangible scarcity and historical stability. BTC, however, is increasingly seen as “digital gold”—a borderless, decentralized asset with a fixed supply of 21 million coins, offering portability and transparency that traditional gold cannot match.
October Correction and Market Dynamics
Bitcoin’s decline from its October 5 all-time high of $126,000 to below $100,000 was driven by multiple factors. JPMorgan strategist Nikolaos Panigirtzoglou cited deleveraging in BTC futures and a $128 million exploit of the DeFi protocol Balancer as key catalysts. Perpetual futures liquidations, which allow speculation without expiry, contributed to heightened selling pressure.
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These events, while significant, have largely run their course. JPMorgan’s analysis shows that the ratio of open interest in perpetual futures to Bitcoin’s market capitalization—a proxy for leverage—has returned to its average level since January 2024, signaling that the deleveraging phase may be concluding.
Volatility-Adjusted Valuation Favors Bitcoin
Gold’s price volatility has risen after surpassing $4,000 per ounce, narrowing the risk gap with Bitcoin. The Bitcoin-to-gold volatility ratio recently fell below 2.0, meaning BTC now consumes only 1.8 times more risk capital than gold. JPMorgan’s “mechanical exercise” indicates that on a volatility-adjusted basis, Bitcoin is currently cheap relative to gold.
Also Read: Bitcoin at $100K, Treasuries in Trouble: What Investors Must Know
Panigirtzoglou estimates that to align with gold’s $6.2 trillion investment base in ETFs and physical holdings, Bitcoin would need to rise roughly two-thirds to $170,000. He noted that after being $36,000 overpriced compared with gold at the end of last year, BTC now trades around $68,000 too low.
As investors reassess value in alternative assets, Bitcoin’s current pricing relative to gold could signal an opportune moment for strategic entry, especially for those weighing digital assets against traditional hedges.
