I have been plotting BTC against GOLD (left) and M2 (right) to try and look at the value adjusted for inflation and buying power (using gold to measure buying power).
M2 is the amount of money in the world (to simplify it) and BTC / M2 has already broken the 2017 ATH by 7.81%. This is a good sign as it shows that we have surpassed the previous cycle high when adjusted for the money printing that has happened since then. If we only look at BTC /USD we do not take into account the devaluation of the dollar over time, and the loss of purchasing power caused by this. It is not perfect as we are simply adjusting for the money printed but not for the change in prices of all assets (and stuff in general), so we look at gold too.
Gold is commonly used as a hedge against inflation and a stable store of value (this paradigm may change soon) and BTC is slowly becoming seen as gold 2.0. Looking at the price versus gold is useful as it adjusts for inflation (in a way) but more importantly buying power. Gold is not a perfect inflation hedge as studies have shown it does not necessarily correlate well to inflation . It does however have a good record of holding its purchasing power over a long time, but not perfectly (see "The Golden Dilemma" paper from National Bureau of Economic Research). Looking at BTC / GOLD shows us that BTC has not yet broken ATH but is close. Meaning that to buy 1 Bitcoin , it will cost you roughly the same purchasing power as it would have back in 2017, not more as the BTC /USD chart would have you believe. I'm using this chart since we are in a blue sky breakout right now, and there is no real way to tell where we may top out. This chart can help with spotting with potential danger zones and reversal areas.
If we do not break the ATH vs GOLD to me that shows that BTC does not have the confidence behind that you may think it has when reading the news. However I think we will break through at some point soon, hopefully after a pullback so I can buy more spot. I'm not making a call on which way this will go. I'm just sharing some charts that people often over look, but can be very useful in times with no historic price action to help make sense of.
I'm very interested to hear peoples thoughts on this in the comments.
ps. HAPPY NEW YEAR
M2 is the amount of money in the world (to simplify it) and BTC / M2 has already broken the 2017 ATH by 7.81%. This is a good sign as it shows that we have surpassed the previous cycle high when adjusted for the money printing that has happened since then. If we only look at BTC /USD we do not take into account the devaluation of the dollar over time, and the loss of purchasing power caused by this. It is not perfect as we are simply adjusting for the money printed but not for the change in prices of all assets (and stuff in general), so we look at gold too.
Gold is commonly used as a hedge against inflation and a stable store of value (this paradigm may change soon) and BTC is slowly becoming seen as gold 2.0. Looking at the price versus gold is useful as it adjusts for inflation (in a way) but more importantly buying power. Gold is not a perfect inflation hedge as studies have shown it does not necessarily correlate well to inflation . It does however have a good record of holding its purchasing power over a long time, but not perfectly (see "The Golden Dilemma" paper from National Bureau of Economic Research). Looking at BTC / GOLD shows us that BTC has not yet broken ATH but is close. Meaning that to buy 1 Bitcoin , it will cost you roughly the same purchasing power as it would have back in 2017, not more as the BTC /USD chart would have you believe. I'm using this chart since we are in a blue sky breakout right now, and there is no real way to tell where we may top out. This chart can help with spotting with potential danger zones and reversal areas.
If we do not break the ATH vs GOLD to me that shows that BTC does not have the confidence behind that you may think it has when reading the news. However I think we will break through at some point soon, hopefully after a pullback so I can buy more spot. I'm not making a call on which way this will go. I'm just sharing some charts that people often over look, but can be very useful in times with no historic price action to help make sense of.
I'm very interested to hear peoples thoughts on this in the comments.
ps. HAPPY NEW YEAR
Comment:
We have now broken the BTC/GOLD ATH by 17% which is a very good sign. Im now biased for more continuation.