Key Insights:
- •Bitcoin price traded at $93,000 at press time, a two-year low versus gold on a liquidity-adjusted basis.
- •Z-score hit minus-2 territory, historically marking major BTC price bottoms before rallies.
- •Gold ETFs hold $559B, which could be rotated into Bitcoin, potentially driving its price to $121K.
Bitcoin price traded near $93,000 on January 19, representing a steep discount to gold on a relative basis adjusted for global money supply. BTC created what some analysts called a rare asymmetric opportunity.
The debasement trade refers to holding hard assets, such as gold or Bitcoin, to protect against currency debasement caused by monetary expansion. Central banks’ quantitative easing programs drove investors toward assets with fixed or capped supply.
Gold served as the traditional hedge for centuries, while Bitcoin emerged as a digital alternative with a hard-coded supply cap of 21 million.
The thesis was being stress-tested in January 2026, as gold hit fresh all-time highs while Bitcoin lagged significantly. BTC slipped to roughly two-year lows in gold-ounce terms. That led some observers to conclude the debasement trade was in gold and silver, not Bitcoin.
The bullish counter-narrative circulated that BTC was deeply undervalued relative to gold on deviation metrics. Proponents argued that those extremes historically lined up with major Bitcoin price bottoms.
Bitcoin Price Shows Extreme Undervaluation: How Much Can Rotate?
BTC price relative to gold, on a liquidity-adjusted basis, showed the crypto trading well below fair value calculated from the global money supply aggregate. The actual BTC/gold ratio fell sharply below the liquidity fair value line. That move widened the gap highlighted in recent Bitwise analysis.
According to Bitwise, the Z-score measuring standardized residual dropped to minus-2 territory in January 2026. That positioned Bitcoin price more than two standard deviations below the expected value.
Historically, Z-scores at or below -1.5 have coincided with major Bitcoin price bottoms, including the 2015 bottom, the 2018-2019 accumulation zone, and the March 2020 crash. Each of these preceded sharp BTC price rallies.
The movable pool from gold to Bitcoin was mostly financial gold in ETFs, funds, and futures rather than central bank gold. Global physically backed gold ETFs ended 2025 at a record $559 billion in assets under management after record annual inflows of about $89 billion.
A reasonable range for gold ETF assets over the months was in the low single digits. 1% to 5% of that $559 billion represented about $5.6 billion to $28 billion in potential rotation capital. Larger numbers were possible only if the macro regime flipped decisively risk-on while maintaining the debasement impulse.
BTC Price Impact from Gold Rotation
Bitcoin’s market cap stood at approximately $1.85 trillion as of press time. Still, the BIS crypto multiplier showed that equilibrium changes in market cap per $1 of inflow could be several times higher.
The BIS paper noted that if only 5% of coins were available for payments, the multiplier would reach 20x. A 1% rotation into gold ETFs of approximately $5.6 billion could translate into $22 billion to $112 billion in Bitcoin price changes, implying a range of $94,000 to $98,000.
A 5% rotation of approximately $28 billion could map to $112 billion to $560 billion, implying Bitcoin price targets of $98,000 to $121,000. Even small reallocations could be large relative to Bitcoin’s price marginal float, making the price response appear discontinuous rather than linear.
What Would Trigger Gold to Bitcoin Flows?
The gold price surge was driven by safe-haven demand, fears of Fed independence, geopolitical risk, and rate-cut expectations from major central banks. For a clean rotation into Bitcoin, three conditions needed to become true simultaneously.
First, the debasement impulse needed to stay alive, so allocators still wanted hard assets as protection against currency weakness. Second, market risk tolerance needed to rise, so allocators preferred the higher-beta hard asset over the lowest-volatility option.
Third, policy and regulatory headline risk for crypto needed to stop dominating daily price formation.
Recent market tape showed inflows were not enough if the macro or policy backdrop turned hostile, with CoinShares data revealing strong weekly crypto product inflows that still faced macro and policy tensions overriding fund flows.
Bitcoin ETFs collectively held about 1,502,564 BTC, worth around $122.27 billion, meaning a $28 billion rotation from gold ETFs would be material relative to the current Bitcoin ETF complex.