Gold firmly sits on the throne of risk-averse, Bitcoin is still struggling in "puberty"

Author: BitpushNews Mary Liu

U.S. stocks fell sharply again on Thursday after a slight rebound due to moderate inflation data yesterday and appeared to drag Bitcoin (BTC) down. As of the close of the day, the Nasdaq fell nearly 2%, while the S&P 500 fell 1.39%. Bitcoin has fallen below $81,000 after hitting nearly $85,000 the previous day, down nearly 3% in the past 24 hours.

However, gold has shown its hedging attributes as always, with spot gold hitting record highs, and as of writing, it was just one step away from breaking the first time at $3,000 per ounce.

The index has fallen nearly 15% since the Nasdaq peaked three weeks ago. During the same period, gold rose about 1%, and Bitcoin fell nearly 20%.

A familiar scene

The current performance of gold may remind everyone of the situation in 2024. At that time, cryptocurrencies and U.S. stocks were consolidating sideways, while gold hit a new high. During the March-October period, Bitcoin fluctuated between $50,000 and $70,000, while gold rose nearly 40% to $2,800. With Trump's election, Bitcoin once soared to more than $100,000, while gold's rise stagnated as funds flowed from safe-haven assets to risky assets.

Now that the feng shui is changing, Bold.report data shows that gold ETFs have recorded the largest inflow of capital since the beginning of 2022 in the past 30 days, adding 3 million ounces of gold holdings.

In contrast, SoSoValue data shows that US spot Bitcoin ETFs have lost $5 billion since February, setting the worst capital outflow record in a year.

Both crypto market trading volume and futures activity showed a significant decline. According to CoinDesk statistics, trading activity on centralized exchanges (CEX) fell sharply, with spot and derivatives trading volumes falling 20.6% to $7.20 trillion, the lowest level since October last year.

The volume of Bitcoin futures trading on the Chicago Mercantile Exchange (CME) also fell 20.3% to $175 billion, causing the total volume of cryptocurrency trading on CME to drop 19.9% ​​to $229 billion. This is the first decline in five months, consistent with the downward trend of the annualized basis of BTC CME. Currently, the annualized basis of BTC CME has fallen to 4.08%, the lowest level since March 2023.

Bitcoin = Gold in Adolescence?

This is not the first time Bitcoin has been decoupled from the definition of safe-haven assets. Bitcoin plummeted more than 50% in two days amid the COVID-19 market crash in 2020. Despite this, the claim of digital gold has been repeatedly mentioned in recent years.

In particular, the Trump administration mentioned Bitcoin’s safe-haven potential in its executive order and planned to establish national Bitcoin reserves. The core of this argument is that financial instability can be hedged through reserves of Bitcoin, which is similar to the logic of reserves of gold and oil.

However, some people are more cautious. Bloomberg think tank analyst Eric Balchunas once compared Bitcoin to a "chili sauce" in investment, believing it can add some "flavor" to traditional stock and bond portfolios. What attracted Bitcoin to him compared to other high-risk assets is "the narrative behind it about hedging the depreciation of the dollar."

Balchunas believes: "To me, Bitcoin is like gold in adolescence."

Some market observers also pointed out that Bitcoin's performance is more like an overly beautified technology stock than digital gold. "If Bitcoin is equal to 'digital gold', then it should act like gold. Otherwise, this will strengthen the claim that Bitcoin is just a high volatility asset. In my opinion, most cryptocurrencies are equivalent to tech stocks, so they are currently and will continue to be affected by the sell-off of tech stocks."

Balanced configuration

It is not surprising that gold performs better than Bitcoin. After all, gold has a history of wealth preservation for hundreds of years and is a globally recognized safe-haven asset. By contrast, although Bitcoin has performed poorly recently, its long-term potential is still worthy of attention. For investors who want to diversify investment risks, simultaneously allocating may be an effective strategy.

The attractiveness of gold lies in its low volatility and as a tool to hedge economic uncertainty. Data shows that gold's long-term volatility was only 15% last year, while Bitcoin's volatility was as high as 40%. However, Bitcoin’s volatility has dropped significantly from its level close to 100% a few years ago. As the market matures, the price trend of Bitcoin is expected to further stabilize.

(BTC red curve, gold blue curve)

In addition, the US spot Bitcoin ETF has only been launched for more than a year, and in many countries, Bitcoin has not been listed as an investable asset. Despite this, Bitcoin's market position is gradually increasing. From initially banned by banks, to the rise of stablecoins, to the application of renewable energy in mining, and 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 you can pay attention to the BTC to gold ratio (BTC/Gold Ratio), which indicates how many ounces of gold you can buy 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 (down 36%), if the current Bitcoin-gold ratio drops from its historical highs to 36% (currently down 30% and down 6%), this may indicate that Bitcoin may be approaching or about to hit a stage bottom in this macro cycle, which may be a buy signal.

In general, although Bitcoin's recent performance is slightly immature than gold and has not completely replaced gold as the ultimate safe haven, it is more like the growth stage that "gold in adolescence" has experienced. With its long and reliable history, gold still has an advantage in turbulent times, which is the value accumulated by time. However, the development path of Bitcoin is far from over, and it needs to be given some time.