Bitcoin plummeted at the start of the Asian trading session on Friday, dropping more than 5% from 89,000 USD to a low of 83,400 USD during U.S. trading hours. Unlike gold or stocks, Bitcoin did not recover – this indicates a crisis in the identification of this 'digital gold.'
The market is re-evaluating its confidence in currencies and organizations, but this flow of money is going to gold reserves instead of into crypto wallets.
The same storm, different outcomes
The sell-off began after tensions between the US and Iran escalated. President Trump posted a warning on Truth Social, threatening military strikes if Tehran did not agree to a nuclear deal. Middle Eastern governments attempted to push both sides to dialogue but have not achieved results as the US continues to send more military forces to the region. Additionally, the risk of a US government shutdown further unsettles market sentiment.
Gold prices have fluctuated significantly, dropping 7% to 5,250 USD in just one hour before recovering dramatically in a V-shape. According to the Kobeissi Letter, the market capitalization of gold fluctuated up to 5.5 trillion USD in just one session – the largest daily fluctuation in history. By the start of the Asian session on Friday, spot gold prices had recovered to above 5,400 USD, up about 1%.
Meanwhile, the US stock market shows quite a good rebound. Nasdaq only dropped 0.7%, primarily due to Microsoft stock plummeting 10% over concerns about AI investment costs. However, Meta's stock rose sharply by 10% thanks to strong earnings reports, and Dow Jones even closed with a slight increase.
Bitcoin tells a different story. The price dropped sharply to 83,400 USD and then only slightly bounced back to 84,200 USD, showing no recovery like the V-shape of gold or the selective upward trend of the tech group.
A frenzy in precious metals, but not occurring with Bitcoin
The difference is very clear. Gold has risen over 25% just this month, nearly doubling since Trump's second term began last year. Silver has been even more impressive, nearly quadrupling since the 'liberation' taxes in April – from below 30 USD to over 118 USD/ounce. Some experts suggest that these fluctuations signal a speculative frenzy.
Analysts believe that the increase in precious metal prices is not only driven by short-term concerns but also signals a loss of faith in currencies, institutions, and the economic order that emerged after the Cold War.
Trump's aggressive policies – such as high tariffs, threats to Greenland and Iran, and pressure on the Federal Reserve including accusations against Chairman Jerome Powell – are causing money to seek safer traditional havens. The strength index of the USD against a basket of major currencies has fallen to its lowest level in four years on Wednesday.
Central banks continue to buy more gold to diversify assets, avoiding excessive reliance on US government bonds. Retail investors are also pouring money into gold, both because they trust it as a safe haven and because they want to ride the price increase wave.
The underlying structural factors remain weak
However, Bitcoin – which is theoretically considered similar to gold in protecting assets against currency devaluation risks – has not been part of that buying wave.
Recent price volatility has exposed the accumulating weaknesses in the crypto market. Bitcoin ETF funds have continuously faced outflows in January, with total assets dropping from a peak of 169 billion USD in October to about 114 billion USD – a decrease of 32%.
The Coinbase Premium Index – which indicates the price difference between Coinbase and international exchanges, often reflecting the interest of US investors – has now turned negative. These indicators also show that capital from large institutions – the main driving force for the 2024-2025 price increase – is withdrawing from the market.
The demand from retail investors has also decreased significantly, according to on-chain data. When both institutional and retail investors withdraw, price increases struggle to maintain sustainable momentum while price drops become more severe.
From the retail investor side, on-chain data from CryptoQuant shows that the number of small transactions (from 0 to 10,000 USD) has steadily decreased, with demand growth in the past 30 days dropping from over 10% (in October) to about -6% currently.
When both institutional and retail investor demand is weak, price increases become hard to sustain, and each decrease becomes stronger.
Wednesday's trading session was a real test for the entire market. Gold has proven to be the top safe haven during crises. The tech stock group has demonstrated that strong fundamentals can help overcome macroeconomic concerns. Bitcoin, however, has not achieved either – its price suffers the drawbacks of a risk asset but does not benefit from the role of a safe haven.
To reaffirm the position of 'digital gold', Bitcoin needs to demonstrate its safety haven capabilities precisely when the market needs it most. Currently, however, this nickname still remains an expectation, not reflecting reality.
