Bitcoin may have lost steam after touching $12,500 earlier in the week, but one of Wall Street’s most closely watched commodity analysts believes the leading cryptocurrency is still positioned for further gains. Mike McGlone, senior commodity analyst at Bloomberg Intelligence, argued on August 20, 2020 that Bitcoin remains tilted toward resuming its price appreciation, pointing to the relationship between BTC and gold as a key indicator.
TL;DR
- Bloomberg Intelligence senior commodity analyst Mike McGlone says Bitcoin is tilted toward further price appreciation
- The BTC-to-gold ratio stands at approximately 6x, the same level as in 2017 before a massive rally
- Bitcoin’s volatility has been decreasing relative to gold, which historically precedes upward price movement
- Institutional demand through Grayscale Bitcoin Trust and CME futures continues to grow
- The post-halving supply squeeze combined with rising demand creates a bullish fundamental backdrop
The Gold Ratio Signal
McGlone highlighted a compelling metric in his analysis: the price of Bitcoin per ounce of gold. This ratio has fluctuated between 3x and 9x over the past several years, and as of August 19, 2020, it sat at approximately 6x — the exact same level as in 2017, the year Bitcoin rocketed from $1,000 to nearly $20,000.
What makes the current setup particularly interesting is that Bitcoin’s volatility has been declining relative to gold. When the BTC-gold ratio sits in the middle of its historical range while Bitcoin’s volatility compresses, the tendency has been for the cryptocurrency to break out to the upside. McGlone characterized this dynamic as the crypto being tilted toward resuming appreciation based on volatility history.
Gold itself has been experiencing increased volatility as the US dollar swings back and forth in response to macroeconomic catalysts, including negotiations over the next round of stimulus spending and uncertainty surrounding the upcoming US presidential election. The contrast between rising gold volatility and declining Bitcoin volatility creates a setup that, in McGlone’s framework, favors the digital asset.
Supply and Demand Fundamentals Align
The Bloomberg analyst did not rely solely on technical signals. He pointed to fundamental drivers that reinforce the bullish case for Bitcoin. The most significant is the supply-demand dynamic that has intensified following the May 2020 halving, which reduced the block reward from 12.5 to 6.25 BTC.
McGlone emphasized that demand and adoption metrics remain favorable when measured against Bitcoin’s defining characteristic of fixed supply. Something unexpected would need to happen for Bitcoin’s price to stop doing what it has done for most of the past decade, he wrote, referring to the asset’s long-term appreciation trend.
On the demand side, McGlone highlighted two key institutional channels. The Grayscale Bitcoin Trust (GBTC) has been absorbing a significant portion of newly mined BTC, effectively reducing the liquid supply available on the open market. Meanwhile, the CME Group’s Bitcoin futures market has seen steadily increasing open interest, signaling growing institutional participation. Together, these vehicles represent the primary pathways through which traditional finance is gaining exposure to Bitcoin, and both have been trending sharply higher throughout 2020.
Context of the Current Pullback
McGlone’s bullish assessment came at a moment when Bitcoin was experiencing a notable pullback. After rallying to $12,500 on Monday August 17 — the highest level since March 2018 — the price had retreated to approximately $11,800 by August 20, representing a decline of nearly 6% in just three days. Some market observers interpreted the drop as the start of a deeper correction, with bears targeting a return to $10,000.
The correction coincided with a broader risk-off move across markets. The US dollar index (DXY) formed a bullish hammer reversal on its weekly chart, triggering selling pressure across commodities, cryptocurrencies, and equities. Gold pulled back from its record high above $2,000, and the S&P 500 showed signs of exhaustion after its own relentless rally.
However, McGlone’s analysis suggests that this pullback is a healthy consolidation within a larger bullish trend rather than the beginning of a sustained reversal. The combination of declining new supply from the halving, growing institutional demand, and favorable volatility dynamics creates what he views as an asymmetric setup skewed toward higher prices over time.
The Bigger Picture
Bitcoin’s year-to-date performance of over 60% has already validated the bullish thesis for 2020, but McGlone’s framework implies there is significantly more room to run. The cryptocurrency has been one of the best-performing assets of the year, outpacing gold, silver, and major stock indices. Ethereum has done even better, gaining over 100% year-to-date, while the total crypto market capitalization has grown by more than 80%.
The macro backdrop continues to support risk assets broadly. The Federal Reserve has committed to near-zero interest rates for the foreseeable future, and unprecedented fiscal stimulus has expanded the money supply dramatically. These conditions, which weaken the dollar and drive investors toward scarce assets, have been a primary catalyst for Bitcoin’s rally and show no signs of abating.
Why This Matters
Mike McGlone’s analysis on August 21, 2020 provided a data-driven counterpoint to the fear that was gripping the market during the pullback from $12,500. His framework — combining the BTC-gold ratio, volatility compression, supply reduction from the halving, and institutional demand growth — offered a comprehensive case for why the dip was likely a buying opportunity rather than a signal to exit. For investors trying to separate short-term noise from long-term trends, McGlone’s Bloomberg Intelligence research served as a valuable anchor in a volatile market.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always do your own research before making investment decisions.
mcglone was one of the few tradfi analysts who actually understood btc. the gold ratio call was prescient
the btc-gold ratio was such an underrated metric back then. most people were just staring at rsi and moving averages
the gold ratio metric was so simple but nobody used it. everyone was obsessed with stock-to-flow instead
stock-to-flow was more popular because it gave a price target. the gold ratio just told you direction. people want numbers not signals
ratio_call_ stock to flow gave people a number to point at which is why it was popular. the gold ratio required relative thinking and most traders just want a price target
gold_ratio_maxi_ S2F was popular because it gave a concrete number people could screenshot and share. gold ratio required context most crypto twitter didn’t have
ratio_call_ stock to flow gave people a line on a chart they could point to. gold ratio required actual thinking. thats why it never caught on with retail
ratio_call_ stock to flow gave a number though. thats why retail loved it. gold ratio required you to think in relative terms which most traders cant do
Pavel K. the GBTC premium being positive for months while retail argued about bubbles told you everything. institutions were quietly accumulating
grayscale_premium_ GBTC premium being positive for months was the loudest signal. institutions were accumulating in plain sight and retail was arguing about bubbles
6x gold ratio matching 2017 levels right before the big run. if you were paying attention to this metric you did well
the grayscale and CMI demand mention is key. institutional flows were the backbone of that rally, not retail fomo
institutional demand through grayscale was the real story in 2020. retail didnt catch on until months later
the gold ratio at 6x in 2020 was such a clean signal. btc went from 12k to 60k in months. mcglone was basically the only analyst not calling a top
McGlone calling upside at 12500 while everyone screamed bubble. the gold ratio at 6x matching 2017 levels was the cleanest signal of that entire cycle
grayscale buying was the whale in the room. GBTC premium was positive for months and everyone ignored what that meant for supply
the grayscale premium was positive the entire time mcglone was calling upside. institutions were already loading up while retail argued about bubbles
BTC to gold ratio at 6x in 2020 and now look where we are. mcglone called the trajectory right even if the timing was fuzzy
mcglone has been permabullish on everything since 2019. calling the direction right on BTC is like calling water wet when the fed prints 4 trillion
bloomberg_skeptic_ calling BTC direction right during 2020 money printing is not impressive. every asset went up. the gold ratio metric was the interesting part
btc at 12500 and mcglone calling for more upside while everyone else was screaming bubble. guy earned his stripes on that call
mcglone was consistent too. didnt flip bearish when btc dipped below 10k after that. stuck to his thesis
mcglone was one of the few tradfi analysts who got crypto early. his commodity framework actually maps well to BTC supply dynamics