After a small rebound yesterday due to mild inflation data, US stocks fell sharply again on Thursday, and it seemed to drag Bitcoin (BTC) down with it. As of the close of the day, the Nasdaq fell nearly 2%, and the S&P 500 fell 1.39%. After hitting nearly $85,000 the day before, Bitcoin has fallen back below $81,000, down nearly 3% in the past 24 hours.
However, gold has continued to demonstrate its safe-haven properties, with spot gold prices hitting record highs and, at the time of writing, just one step away from breaking through $3,000 per ounce for the first time.
Since the Nasdaq peaked three weeks ago, the index has fallen nearly 15%. During the same period, gold has risen about 1% and Bitcoin has fallen nearly 20%.
A familiar scene
Gold's current performance may remind everyone of the situation in 2024. At that time, cryptocurrencies and US stocks were trading sideways, while gold hit new highs. Between March and October, Bitcoin fluctuated between $50,000 and $70,000, while gold rose nearly 40% to $2,800. With Trump's election, Bitcoin soared to more than $100,000, while gold's gains stagnated as funds flowed from safe-haven assets to risky assets.
Now the situation has changed. Bold.report data shows that gold ETFs have recorded the largest inflows since the beginning of 2022 in the past 30 days, increasing gold holdings by 3 million ounces.
In contrast, SoSoValue data shows that U.S. spot Bitcoin ETFs have lost $5 billion since February, setting a record for the worst outflow in a year.
Crypto market trading volume and futures activity have both seen a significant decline. According to CoinDesk statistics, trading activity on centralized exchanges (CEX) has fallen sharply, with spot and derivatives trading volumes falling 20.6% to $7.20 trillion, the lowest level since October last year.
CME Bitcoin futures volume also fell 20.3% to $175 billion, causing CME's total cryptocurrency trading volume to fall 19.9% to $229 billion. This was the first decline in five months and was consistent with the downward trend of the BTC CME annualized basis. Currently, the BTC CME annualized basis has fallen to 4.08%, the lowest level since March 2023.
Bitcoin = Gold for Adolescence?
This isn’t the first time Bitcoin has decoupled from the definition of a safe haven asset. During the COVID-induced market crash in 2020, Bitcoin plunged more than 50% in two days. Still, the narrative of digital gold has been mentioned repeatedly in recent years.
In particular, the Trump administration mentioned the safe-haven potential of Bitcoin in its executive order and plans to establish a national Bitcoin reserve. The core of this argument is that by reserving Bitcoin, financial instability can be hedged, which is similar to the logic of reserving gold and oil.
However, some people are more cautious. Eric Balchunas, an analyst at Bloomberg Intelligence, once compared Bitcoin to "hot pepper sauce" in investment, believing that it can add some "flavor" to traditional stock and bond portfolios. Compared with other high-risk assets, what attracts him to Bitcoin is "the narrative behind it about hedging against the depreciation of the US dollar."
“For me, Bitcoin is like gold in its adolescence,” Balchunas said.
Some market observers also pointed out that Bitcoin's performance is more like an over-glorified technology stock than digital gold. Nate Geraci, president of ETF Store, said on the X platform: "If Bitcoin is equivalent to 'digital gold', then it should behave like gold. Otherwise, it will reinforce the argument that Bitcoin is just a highly volatile asset. In my opinion, most cryptocurrencies are equivalent to technology stocks, so they are and will continue to be affected by the sell-off of technology stocks."
Balanced Configuration
It is not surprising that gold outperforms Bitcoin. After all, gold has a history of wealth preservation for hundreds of years and is a globally recognized safe-haven asset. In contrast, although Bitcoin has performed poorly recently, its long-term potential is still worth paying attention to. For investors who want to diversify their investment risks, simultaneous allocation may be an effective strategy.
Gold's appeal lies in its low volatility and its role as a hedge against economic uncertainty. Data shows that last year, gold's long-term volatility was only 15%, while Bitcoin's volatility was as high as 40%. However, Bitcoin's volatility has dropped significantly from the level of nearly 100% a few years ago. As the market matures, Bitcoin's price trend is expected to stabilize further.
In addition, the US spot Bitcoin ETF has only been launched for more than a year, and in many countries, Bitcoin is still not listed as an investable asset. Despite this, Bitcoin's market position is gradually improving. From being banned by banks at the beginning, to the rise of stablecoins, to the application of renewable energy in mining, and to the launch of investable ETFs, Bitcoin has overcome many challenges step by step.
Regarding Bitcoin's position in the current cycle, market analyst @AxelAdlerJr believes that we can pay attention to the BTC/Gold Ratio, which shows how many ounces of gold can be purchased with one Bitcoin.
Analysts believe that although the current macroeconomic situation is unstable, the price of gold is relatively stable. Based on the experience of the previous cycle (a 36% drop), if the current Bitcoin to gold ratio drops by a total of 36% from its historical high (it has already fallen by 30% and another 6%), then this may indicate that Bitcoin may be close to or about to hit a local bottom in this round of macroeconomic cycle, which may be a buy signal.
In general, although Bitcoin's recent performance is slightly immature compared to gold and has not yet completely replaced gold as the ultimate safe haven, this is more like the growth stage experienced by "adolescent gold". With its long and reliable history, gold still has an advantage in turbulent times, which is the value of time precipitation. However, Bitcoin's development is far from over, and it still needs to give it some time.
