Bitcoin's undervaluation compared to gold is sparking predictions of a potential price reversal. According to Samson Mow, the CEO of JAN3, bitcoin's prices are currently below trend values relative to both gold and the global money supply.
The Z-score, a metric indicating the deviation of the price from its historical average, has historically been a reliable indicator of undervaluation. When the bitcoin-to-gold Z-score falls below -2, it often precedes major rallies in the cryptocurrency market.
A look back at past instances shows that previous drops in the Z-score have indeed led to significant price increases. For example, in November 2022, the index fell below -3 following the collapse of FTX, and bitcoin's price subsequently increased by over 150% in the following year.