Author: Bitpush News Mary Liu
After a slight rebound the previous day due to mild inflation data, the US stock market plummeted again on Thursday, seemingly dragging down Bit (BTC) as well. As of the close of the day, the NASDAQ fell nearly 2%, and the S&P 500 index fell 1.39%. Bit (BTC), which had reached nearly $85,000 the previous day, has fallen back below $81,000, with a drop of nearly 3% in the past 24 hours.
However, gold has consistently demonstrated its safe-haven properties, with spot gold prices hitting a new high, and as of the time of writing, it is just one step away from breaking through $3,000 per ounce for the first time.
Since the NASDAQ index peaked three weeks ago, it has fallen nearly 15%. During the same period, gold has risen about 1%, while Bit (BTC) has fallen nearly 20%.
A Familiar Scenario
The current performance of gold may remind people of the scenario in 2024. At that time, cryptocurrencies and US stocks were in a sideways consolidation, while gold hit new highs. From March to October, Bit (BTC) fluctuated between $50,000 and $70,000, while gold rose nearly 40% to $2,800. With the election of Trump, Bit (BTC) once soared to over $100,000, while the gold rally stagnated as funds flowed from safe-haven assets to risky assets.
Now the tide has turned, and Bold.report data shows that gold ETFs have recorded the largest inflows in 30 days since the beginning of 2022, adding 3 million ounces of gold holdings.
In contrast, SoSoValue data shows that the US spot Bit (BTC) ETF has lost $5 billion in outflows since February, the most severe capital outflow in a year.
Trading volume and futures activity in the crypto market have also seen significant declines. According to CoinDesk's statistics, trading activity on centralized exchanges (CEX) has plummeted, with the combined spot and derivatives trading volume down 20.6% to $720 billion, the lowest level since October last year.
The trading volume of Bit (BTC) futures on the Chicago Mercantile Exchange (CME) also fell by 20.3% to $175 billion, causing the total crypto trading volume on CME to decline by 19.9% to $229 billion. This is the first decline in five months, consistent with the downward trend in the BTC CME annualized basis. Currently, the BTC CME annualized basis has fallen to 4.08%, the lowest level since March 2023.
Bit (BTC) = Adolescent Gold?
This is not the first time Bit (BTC) has decoupled from the definition of a safe-haven asset. During the market crash triggered by COVID-19 in 2020, Bit (BTC) plummeted more than 50% in two days. Nevertheless, the "digital gold" narrative has been repeatedly mentioned in recent years.
Particularly, the Trump administration's executive order mentioned the safe-haven potential of Bit (BTC) and planned to establish a national Bit (BTC) reserve, the core of which is that holding Bit (BTC) can hedge against financial instability, similar to the logic of holding gold and oil reserves.
However, some have a more cautious attitude. Bloomberg Intelligence analyst Eric Balchunas once compared Bit (BTC) to "chili sauce" in investment, believing that it can add some "flavor" to traditional stock and bond portfolios. Compared to other high-risk assets, what attracts him about Bit (BTC) is "the narrative behind it as a hedge against dollar devaluation".
Balchunas believes: "To me, Bit (BTC) is like adolescent gold."
Some market observers also point out that the performance of Bit (BTC) is more like an overly romanticized tech stock, rather than digital gold. Nate Geraci, president of ETF Store, said on the X platform: "If Bit (BTC) equals 'digital gold', then it should perform like gold. Otherwise, this will reinforce the idea that Bit (BTC) is just a highly volatile asset. In my view, most cryptocurrencies are equivalent to tech stocks, so they are currently and will continue to be affected by the sell-off in tech stocks."
Balanced Allocation
It is not surprising that the performance of gold is better than Bit (BTC), as gold has a centuries-old history of preserving wealth and is a globally recognized safe-haven asset. In comparison, although Bit (BTC) has not performed well recently, its long-term potential is still worth noting. For investors looking to diversify their investment risks, a simultaneous allocation may be an effective strategy.
The appeal of gold lies in its low volatility and its role as a hedge against economic uncertainty. Data shows that the long-term volatility of gold was only 15% last year, while the volatility of Bit (BTC) was as high as 40%. However, the volatility of Bit (BTC) has already decreased significantly from the nearly 100% level a few years ago. As the market matures, the price trend of Bit (BTC) is expected to become more stable.
(Bit (BTC) red line, gold blue line)
Additionally, the US spot Bit (BTC) ETF has only been launched for a little over a year, and in many countries, Bit (BTC) is still not listed as an investable asset. Nevertheless, the market position of Bit (BTC) is gradually improving. From being initially banned by banks, to the rise of stablecoins, the application of renewable energy in mining, and the launch of investable ETFs, Bit (BTC) has overcome many challenges step by step.
Regarding the current position of Bit (BTC) in the current cycle, market analyst @AxelAdlerJr believes that the Bit (BTC)/Gold Ratio, which indicates how many ounces of gold can be purchased with one Bit (BTC), is worth watching.
The analyst believes 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% decline), if the current Bit (BTC)/Gold Ratio falls a total of 36% from the historical high (it has already fallen 30%, and another 6% would complete the 36% decline), this may signal that Bit (BTC) is approaching or has already reached a local bottom in the current macroeconomic cycle, which could be a buy signal.
In summary, although Bit (BTC)'s recent performance has been slightly less mature compared to gold, this is more like the growth stage of "adolescent gold". Gold, with its long and reliable history, still has an advantage in turbulent times, which is the value of time-tested. However, the development path of Bit (BTC) is far from over, and it still needs some time.
