How Does the Steady Decline in the Copper-Gold Ratio Affect Bitcoin?

From pro-crypto Republican candidate Donald Trump’s increasing likelihood of winning the upcoming US presidential election to Fed rate cut expectations, there are several key developments awaiting bitcoin (BTC) bulls. However, the widely followed copper-gold ratio signals danger for risk assets, including cryptocurrencies.

The rate, which represents the price per pound of copper divided by the price of gold per ounce, has fallen to levels seen in late 2020, reaching the lowest level since the beginning of the year, according to data platform TradingView.

The metric, which is important for global economic health and investor risk appetite, fell over 15% this year, the biggest loss since 2018.

Perhaps more worrying is that the rate has fallen 10% since China, the world’s largest importer of commodities, announced a series of stimulus measures to support its economy in late September.

The US Federal Reserve (Fed) made a major interest rate cut of 50 basis points in September and initiated liquidity easing. But this failed to help support the rate.

The steady decline could be a sign of a more divergent economic picture that risk assets are missing. Copper, an industrial metal, tends to perform well when the global economy expands and has historically responded positively to China’s stimulus announcements. Gold is considered a safe haven. Therefore, a decrease in the copper-gold ratio is seen as a risk-off signal.

According to CoinDesk data, BTC is up 60% year-on-year at the time of writing and is currently trading around $67,800.

However, most of the gains occurred in the first quarter and since then the bulls have consistently failed to gain new support above $70,000. Bull failure, collapsed crypto exchange Mt. This has been attributed to several factors, including fears of oversupply resulting from Gox’s loan repayments.

The decline in the copper-gold ratio also started in May and indicated risk aversion. The downtrend accelerated in July and financial markets witnessed brief risk aversion in early August, which saw BTC fall from $65,000 to $50,000.

Data from TradingView shows that BTC’s best years (2013, 2016-17 and 2020-21) were associated with an upward trend in the copper-gold ratio.

The decrease in this rate casts doubt on BTC’s upward expectations and calls for a rally towards $ 100,000 by the end of the year.