Bitcoin Price Could Be Set Up for Reversal Due to Undervaluation

Bitcoin's valuation has been a topic of discussion among cryptocurrency enthusiasts and analysts alike. Jan3 CEO Samson Mow is the latest to weigh in on this debate, suggesting that the digital currency is undervalued compared to gold.

According to Mow, bitcoin's market cap is currently around 24-66% below its trend relative to both gold's market cap and the global money supply. This discrepancy has led him to believe that a potential price reversal could be on the horizon for bitcoin.

The Z-score on the bitcoin-to-gold ratio is a key metric used by analysts to gauge market trends. A score of -2 or lower historically indicates major rallies in bitcoin's price. Currently, the Z-score stands at around -1.24, which Mow believes could signal an impending increase in value.

Previous instances where the Z-score dropped below -2 have seen significant gains for bitcoin. For example, during the FTX collapse in November 2022, the ratio's Z-score fell below -3, and subsequently, the price of bitcoin rose by over 150% within a 12-month period.

Similarly, in March 2020, when the metric fell below -2 during the Covid-19 crash, bitcoin plummeted to around $3,717 but later surged by more than 300% over the following year. By November 2021, it reached an all-time high near $69,000.

However, not all analysts share Mow's optimism. Some have forecast further downside for bitcoin due to investor uncertainty and geopolitical tensions, potentially leading to a price drop to around $50,000.