Why does Gold outperform Bitcoin?
What is the BTC/Gold ratio telling us about where we may find the bottom?
Aloha friends,
Four months have passed since Bitcoin peaked on October 6th. In the meantime, Gold continues to outperform.
But why is Gold outperforming? Is the BTC/Gold ratio giving us some signs? And why does it look like we may end up in a great buying opportunity?
This week, I am analyzing Gold vs BTC and identify potential catalysts for the next move.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.
Vamos!
Gold vs BTC
BTC is currently down roughly 46% from the high established on 06.10.25 (134 days ago).
Compared to the last two cycles:
‘21 Cycle: BTC was down 45% 134 days post the 09.11.21 peak
‘17 Cycle: BTC was down 59% 134 days post the 18.12.17 peak
So, Bitcoin is quite in line with last cycle. However, it feels worse this time.
Why is that?
In my view, this is due to the outperformance of Gold & Silver against Bitcoin’s weakness. Gold is up 26% since 06.10.25. Silver is up 51% (with 157% at its peak).
But - as in most of the cases - when we zoom out, one should not be concerned to much.
Data: XE.com - BTC vs Gold
A Comparison
BTC is currently down 67% vs. Gold from its peak ratio of 40 on 17.12.24.
In the last cycle, the ratio peaked at 37 and bottomed at 9 (76% decline).
In the ‘17 cycle, the ratio peaked at 15 and bottomed at 2.6 (83% decline).
What can we see from here?
What we’ve seen so far look to be in line with what we would expect to see in terms of the Gold/BTC ratio.
The main difference from the past is, that Gold is outperforming, which makes it feel to be different.
However, do not forget that BTC grew 6.6x in this last cycle. Gold is not even up 2x over the same period. Therefore, the discussion if BTC has lost it’s strength relative to Gold, seems to be not more than recency bias.
What is the reason for Gold’s Outperformance?
Gold is the typical asset for global markets when there is uncertainty. Therefore, you may see it as a warning system → it goes up when the confidence in geopolitical, fiscal or monetary stability decreases. All this, before the real stress becomes visible in traditional market indicators.
Diving deeper, it seems that specifically China is the main driver in the rising Gold price, due to large purchases and a reduction from the US-Dollar exposure.
Data: Global Liquidity Index
Why does China buy Gold?
No issuing country
Cannot be sanctioned
There is no counterparty
Settlement rails cannot be blocked
BTC
At present, Bitcoin (“digital gold”) lacks the classic tailwinds that typically support traditional safe-haven assets. Despite the recent establishment of a U.S. Strategic Bitcoin Reserve, BTC continues to behave predominantly as a risk-on asset rather than a risk-off one.
Its price dynamics are governed by a distinct set of forces: waves of network adoption, global liquidity cycles, on-chain feedback loops, and other unique catalysts tied to technological proliferation and broader internet-scale growth.
For Bitcoin to fully evolve into a credible risk-off reserve asset, wide accumulation by central banks will likely be required. I expect this shift to materialise eventually, though probably not until the millennial generation assumes primary economic and policy influence.
Where might BTC/Gold Ratio Bottom?
So looking at my base case, I would anticipate the ratio to bottom similarly as in the past two cycles (with a higher low!). This would mean a decline of around 75% (which is close to where we are right now) and a ratio of around 10-11.
Closing Thoughts
Rotation from Gold/Silver?
I remain skeptical that this transition will occur in the foreseeable future. The investor bases for gold/commodities and cryptocurrency remain fundamentally different, shaped by generational preferences and risk tolerances.
Moreover, any capital rotation out of gold into Bitcoin is more likely to come from late-stage retail participants chasing commodity-like momentum. This group tends to enter at elevated valuations and is more vulnerable to drawdowns and realised losses.
For these reasons, I view patience as the best strategy at this very moment.
Bitcoin is now trading at $67k on the 200 EMA support level and the chart looks broken.
Data: TradingView
Portfolio Management
As mentioned above: I stay patient. There are no signs indicating “risk-on” and there is still potential for a further leg down over the coming weeks if the cycle performs as the previous one(s). I keep some cash on the side to deploy once I see clear signs from the market.
That’s it for today - I hope I could deliver some insights.
Maloha
Stay Humble. Stay Curious. Enjoy the journey.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.