Author: BitpushNews Mary Liu

After a slight rebound yesterday due to mild inflation data, U.S. stocks fell sharply again on Thursday, seemingly dragging Bitcoin (BTC) down with them. By the close of the day, the Nasdaq fell nearly 2%, and the S&P 500 index dropped 1.39%. Bitcoin, which reached nearly $85,000 the previous day, has fallen back below $81,000, with a decline of nearly 3% in the past 24 hours.

However, gold continues to demonstrate its safe-haven properties, with spot gold prices reaching a historic high, and as of the time of writing, it is just one step away from breaking the $3,000 per ounce mark 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 Bitcoin has dropped nearly 20%.

A Familiar Scenario

The current performance of gold may remind everyone of the situation in 2024. At that time, cryptocurrencies and U.S. stocks were consolidating, while gold was reaching new highs. From March to October, Bitcoin fluctuated between $50,000 and $70,000, while gold rose nearly 40% to $2,800. Following Trump's election, Bitcoin once soared above $100,000, while gold's upward momentum stalled as funds flowed from safe-haven assets to risk assets.

Now the tables have turned. Bold.report data shows that gold ETFs recorded the largest inflow of funds in the past 30 days since early 2022, increasing their gold holdings by 3 million ounces.

In contrast, SoSoValue data shows that the U.S. spot Bitcoin ETF has lost $5 billion since February, marking the most severe outflow of funds in a year.

The trading volume and futures activity in the crypto market have also seen significant declines. According to CoinDesk statistics, trading activity on centralized exchanges (CEX) has sharply decreased, with total spot and derivatives trading volume dropping 20.6% to $7.20 trillion, the lowest level since October of last year.

The trading volume of Bitcoin futures on the Chicago Mercantile Exchange (CME) also fell by 20.3% to $175 billion, leading to a 19.9% decline in total cryptocurrency trading volume on the CME, down to $229 billion. This marks the first decline in five months, consistent with the downward trend of the BTC CME annualized basis, which has now dropped to 4.08%, the lowest level since March 2023.

Bitcoin = Gold in Its Adolescence?

This is not the first time Bitcoin has decoupled from the definition of a safe-haven asset. During the market crash triggered by COVID in 2020, Bitcoin plummeted over 50% in two days. Nevertheless, the notion of digital gold has been frequently mentioned in recent years.

Especially during the Trump administration, when Bitcoin's safe-haven potential was highlighted in executive orders, and plans were made to establish a national Bitcoin reserve, the core argument was that holding Bitcoin could hedge against financial instability, similar to the logic of holding gold and oil reserves.

However, some hold a more cautious view. Bloomberg Intelligence analyst Eric Balchunas has likened Bitcoin to "hot sauce" in investing, suggesting it can add some "flavor" to traditional stock and bond portfolios. What attracts him to Bitcoin compared to other high-risk assets is "the narrative behind it about hedging against dollar depreciation."

Balchunas stated, "To me, Bitcoin is like gold in its adolescence."

Market observers have also pointed out that Bitcoin's performance resembles that of an overhyped tech stock rather than digital gold. Nate Geraci, president of ETF Store, stated on the X platform, "If Bitcoin equals 'digital gold,' then it should behave like gold. Otherwise, it reinforces the notion that Bitcoin is just a highly volatile asset. In my view, most cryptocurrencies are equivalent to tech stocks, and thus they are currently and will continue to be affected by tech stock sell-offs."

Balanced Allocation

It is not surprising that gold is outperforming Bitcoin, as gold has a centuries-long history of wealth preservation and is globally recognized as a safe-haven asset. In contrast, while Bitcoin has performed poorly recently, its long-term potential remains worth noting. For investors looking to diversify risk, 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 last year, gold's long-term volatility was only 15%, while Bitcoin's volatility was as high as 40%. However, Bitcoin's volatility has significantly decreased from nearly 100% a few years ago. As the market matures, Bitcoin's price movements are expected to stabilize further.

(BTC red curve, gold blue curve)

Additionally, the U.S. spot Bitcoin ETF has only been launched for a little over a year, and in many countries, Bitcoin is still not classified as an investable asset. Nevertheless, Bitcoin's market position is gradually improving. From being initially banned by banks to the rise of stablecoins, the application of renewable energy in mining, and the introduction of investable ETFs, Bitcoin has overcome numerous challenges step by step.

Regarding Bitcoin's position in the current cycle, market analyst @AxelAdlerJr suggests paying attention to the BTC to gold ratio (BTC/Gold Ratio), which indicates how many ounces of gold can be purchased with one Bitcoin.

Analysts believe that although the current macroeconomic situation is unstable, gold's price remains relatively stable. Based on experiences from the previous cycle (a 36% drop), if the current Bitcoin to gold ratio declines by a total of 36% from its historical peak (it has already dropped 30%, needing another 6% drop), this may indicate that Bitcoin is approaching or about to reach a local bottom in this macro cycle, which could be a buying signal.

In summary, although Bitcoin's recent performance appears somewhat immature compared to gold and has not yet fully replaced gold as the ultimate safe haven, it resembles the growth phase of "gold in its adolescence." Gold, with its long and reliable history, continues to hold an advantage during turbulent times, reflecting the value of time-tested assets. However, Bitcoin's developmental journey is far from over, and it still needs some time.

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