Reasons to have faith
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As Bitcoin (BTC) faces challenges during the recent crypto market downturn – struggling to decisively surpass the $84,000 barrier – gold (XAU) continues its remarkable ascent, reaching an unprecedented high of $3,000 per ounce on March 14.
Bitcoin Loses Brilliance to Gold
The beginning of 2025 has proven difficult for the leading cryptocurrency. BTC has fallen over 10% year-to-date (YTD), declining from about $94,000 on January 1 to roughly $84,000 at the time of writing. Conversely, gold has surged nearly 13% during the same timeframe.
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Market analyst Northstar posted the subsequent graph on X yesterday, depicting the BTC-to-gold ratio over the last 12 years. The graph indicates that BTC seems to be breaking below a key support threshold that has remained firm for more than a decade.
Should Bitcoin maintain price action below this support threshold for several weeks or months, it might indicate the conclusion of the ongoing crypto bull market. BTC’s lackluster performance compared to gold is also reflected in the differing capital inflows into BTC and gold exchange-traded funds (ETFs).
As per information from the World Gold Council, US-based spot gold ETFs have drawn in excess of $6 billion in inflows YTD. Globally, spot gold ETFs have witnessed inflows surpassing $23 billion.
In contrast, data from SoSoValue reveals that US-based spot BTC ETFs have seen nearly $1.5 billion in net outflows YTD. This stark difference in capital transitions reflects a shift in investor approach from risk-on to risk-off assets.
Multiple reasons could account for investors’ increasing reluctance toward risk-on assets, including new trade tariffs from US President Donald Trump, the US Federal Reserve’s (Fed) aggressive monetary policy, and the recent decline in stock markets.
Is The Crypto Bull Market Concluded?
BTC’s subpar performance in comparison to gold raises concerns about the sustainability of the current crypto bull market. The aggregate crypto market capitalization has decreased by over $600 billion since the start of the year, currently estimated at about $2.8 trillion.
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Famed gold proponent Peter Schiff contends that BTC has already been experiencing a bear market for the last three years. In a post on X, Schiff asserted:
One Bitcoin currently purchases 27.7 ounces of gold. At its peak in 2021, one Bitcoin was capable of acquiring 36.3 ounces of gold. This indicates that the value of Bitcoin has declined by 24% when measured in gold, which is true money, over the course of the last three and a half years.
Nonetheless, favorable macroeconomic changes may still shift the current situation in BTC’s favor. For instance, US inflation appears to be easing, potentially forcing the Fed to switch towards quantitative easing and enhancing market liquidity – an opportunity for risk-on assets.
Similarly, a decline in the US dollar index could rekindle optimism for assets such as stocks and cryptocurrencies. At the time of writing, BTC is trading at $84,902, having increased by 3.8% in the previous 24 hours.
Featured image courtesy of Unsplash, charts sourced from X and TradingView.com
