Bitcoin is now most undervalued versus gold: Will BTC price rebound?

Bitcoin (BTC), often touted as ‘digital gold,’ has historically maintained a volatile but measurable correlation with the traditional hedge asset, physical gold (XAU). Recent analysis, particularly focused on the BTC/XAU ratio, suggests that Bitcoin is currently trading at one of its most extreme undervaluation points relative to gold in recent history, prompting serious discussion about an imminent price rebound.

The BTC/XAU ratio, which measures how many ounces of gold one Bitcoin can purchase, has significantly compressed following recent market volatility and post-Halving consolidation. While gold has been performing strongly, buoyed by global geopolitical uncertainty and steady central bank purchasing, Bitcoin experienced a substantial correction from its March peak. This divergence means the growth premium usually associated with Bitcoin’s superior risk-adjusted returns has temporarily evaporated.

Historically, extreme lows in the BTC/XAU ratio have acted as reliable contrarian indicators, signaling an ‘oversold’ condition for BTC relative to XAU. When the ratio reverts to its mean, the ensuing move is typically characterized by Bitcoin rapidly outperforming gold.

Several catalysts support the argument for a significant BTC price rebound. Firstly, institutional demand, evidenced by the steady absorption of supply through US spot ETFs, remains fundamentally robust. Secondly, the structural supply shock induced by the recent Halving has not yet fully manifested in sustained higher prices, suggesting underlying supply scarcity that will eventually push prices up.

Furthermore, market expectations surrounding macroeconomic stabilization and eventual interest rate cuts by the Federal Reserve could lessen the attraction of non-yielding physical gold, leading to a rotation of capital back into higher-beta growth assets like Bitcoin. If Bitcoin manages to consolidate above critical technical support, the market dynamics indicate that the current low valuation ratio against gold is likely unsustainable, setting the stage for a normalization phase that could see BTC targeting previous resistance levels and beyond.

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