Bitcoin (BTC) has entered its deepest undervaluation against gold (XAU) on Friday, leading to renewed expectations of a potential capital rotation from the precious metal back into cryptocurrency markets in 2026.
Key takeaways from this development include:
- •Bitcoin is currently at a record undervaluation compared to gold, a level historically associated with significant bottoms in BTC's price.
- •Past cycles led by gold suggest a bullish outlook for BTC's price in 2026.
Bitcoin Projected to "Massively Outperform Gold" in 2026
This undervaluation reading is derived from the BTC–XAU ratio’s Z-score, a metric designed to measure the deviation of the current ratio from its long-term average.
A Z-score reading below −2 indicates that Bitcoin is trading more than two standard deviations below its historical norm relative to gold. This situation is exceptionally rare, and in this instance, BTC has entered the model’s lowest band for the first time on record.
Historically, movements in the BTC/XAU ratio toward the −2 standard deviation zone have preceded extended periods where Bitcoin significantly outperformed gold, as illustrated in the graph below.
Julius, the analyst who conceptualized the BTC/Gold Power-Law bands and the Z-score oscillator, stated that “Everything points to Bitcoin massively outperforming Gold over the coming months.”
Implications of Gold's Record Rally for BTC Price
In the past, dips in the Z-score toward the −2 standard deviation zone have coincided with major Bitcoin bottoms.
For example, a BTC/XAU undervaluation signal observed in November 2022 was followed by a BTC price rally of approximately 150% over the subsequent year.
Similarly, Bitcoin experienced a rise of over 1,170% approximately one year after the signal appeared in March 2020.
According to Julius, the Z-score has also accurately predicted Bitcoin’s macro tops.
He explained in a X post on January 3rd: “At the end of 2017, Bitcoin was extremely overbought, while Gold was oversold. Shortly after, Bitcoin entered a bear market, and Gold began a multi-year rally toward new ATHs.”
Furthermore, historical data indicates that Bitcoin’s most significant price expansions typically occur after gold bull markets.
Bitcoin’s parabolic phases have historically commenced only after gold has moved decisively above its long-term trend. In previous cycles, this lag has varied, ranging from approximately two months to over a year, after which BTC has delivered its largest percentage gains.
Consequently, Bitcoin’s current discount relative to gold suggests a bullish price outlook for BTC in 2026, assuming historical patterns persist.
Multiple analysts have projected that BTC could reach between $200,000 and $300,000 by the end of the year.