In its crypto outlook for August, Bloomberg contends that the price of Bitcoin (BTC) is stabilizing at six times the price of an ounce of gold. This speculation came shortly after the correlation between the two assets reached an all-time high.

Bitcoin and Gold price chart

Bitcoin and Gold price chart. Source: Trading Economics.

If the trend continues, Bitcoin may go to $18k

Bloomberg has professed for some time now that Bitcoin is on the verge of becoming digital gold. This is due to the asset’s inherently similar qualities, such as a limited supply and a low growth rate. The company is now taking its hypothesis a step further by claiming that there is a price ratio relationship between the assets:

“Stabilizing at about 6x the per-ounce price of gold, Bitcoin's increasing correlation and declining volatility relative to the precious metal indicate an enduring relationship for price advancement, in our view. Unparalleled global central-bank easing should remain a tailwind for the quasi-currencies.”

It is unclear why there would be a mathematical relationship between the prices of these two assets at present. However, if this relationship persists into the future, the price of Bitcoin may appreciate to $18,000. To this effect, Bloomberg sees “the potential upside in spot gold toward $3,000 an ounce”.

Bitcoin is undervalued according to a key on-chain metric

Bloomberg also believes there is an on-chain indicator which backs up the idea that Bitcoin is currently undervalued:

“The 30-day average of addresses from Coinmetrics on Aug. 4 translated to a Bitcoin price above $14,000, vs. about $11,000 on an auto-scale basis since 2017.”

The report points to the continued expansion of Grayscale’s Bitcoin Trust Fund, or GBTC, as a significant factor in diminishing Bitcoin’s available supply “GBTC inflows over the past year have absorbed about a third of new Bitcoin supply. If the inflow pace doesn't subside, absorption will approach 50%, with less supply.”

Bloomberg says that something unexpected would need to happen to prevent Bitcoin’s advance in the face of prevailing “zero and negative interest rates”.