Bitcoin was hovering around $76,400 on Wednesday, local time, after falling below US$80,000 in the early hours of Monday morning.
After briefly returning to its “key support level” of US$80,000 this week, cryptocurrency is now back in the red as evolving geopolitical tensions push investors into a risk-off rotation.
Bitcoin is down 11.27 per cent over the last month, while gold has seen gains of around 2.24 per cent.
“For now, the ‘digital gold’ narrative, which has been a key selling point for bitcoin, isn’t holding up,” Charlie Sherry, head of finance and crypto analyst at BTC Markets, said.
“Bitcoin hasn’t seen the same kind of demand that gold has, despite both assets sharing similar characteristics.”
Instead, crypto continues to show a stronger correlation to risk assets, as exemplified by this latest sell-off.
“Meanwhile, gold – the traditional safe-haven asset – surged to US$3,167 last quarter, showing where investors are seeking refuge in uncertain times,” Sherry pointed out.
According to him, there is no mystery behind this divergence. With US President Donald Trump’s blanket tariff announcement last week shaking macro markets, the uncertainty of global trade relations leaves risk assets looking increasingly precarious.
Equities took the initial blow, with the S&P 500 dropping 10 per cent last week alone.
“Investors are increasingly interpreting Trump’s potential return as a move to bolster pro-worker policies at the expense of Wall Street, a sentiment that is reverberating across both equities and crypto markets,” Sherry explained.
Commenting on the divergence that markets are witnessing between gold and bitcoin, Coinstash founder Mena Theodorou said that it highlights the different roles that the two assets play during periods of market stress. This is in spite of them often being compared.
“While both are considered hedge assets, resistant to debasement, their short-term behaviour can differ significantly,” Theodorou told Investor Daily. “Gold has remained relatively resilient despite global trade tensions, supported by its market depth and established safe-haven status.
“Bitcoin, by contrast, has had a rough week and is being impacted by macroeconomic conditions, like equities.”
While bitcoin is often referred to as “digital gold”, Theodorou said its position as a high-beta risk asset is confirmed by its short-term price movements.
“Its long-term appeal as a scarce, digitally native store of value remains strong, but it’s clear its safe-haven credentials are still developing,” he said.
“Gold may be outperforming during this turbulence, but we should keep in mind that bitcoin has consistently delivered some of the strongest risk-adjusted returns of any asset, and continues to appeal to long-term investors seeking upside and a debasement hedge in a digital world,” Theodorou concluded.
Yellow metal shines
While gold continued to enjoy its record run at the turn of the month, a sharp sell-off earlier this week sent the commodity back below US$3,000, as it fell victim to the broader market sell-off.
Commenting on this slight setback, Saxo Bank’s head of commodity strategy, Ole Hansen, said while gold’s safe-haven role temporarily received a setback, the drop was “nowhere near” the scale seen during the early stages of the pandemic panic back in 2020.
Back then, over a 10-day period, gold slumped by 13 per cent before recovering strongly.
“The combination of heightened global economic tensions, the risk of stagflation, a weaker dollar combined with falling US real yields as inflation expectations rise, will in our opinion continue to support bullion,” Hansen said.
According to him, a growing number of central banks are diversifying their reserves away from the US dollar, often turning to gold as a “neutral” reserve asset.
With uncertainty around the Trump administration’s trade policies potentially pushing the US dollar lower, this will further support gold prices in the near term.
“A recent correlation between defense stocks and gold suggests that as geopolitical tensions rise – such as conflicts, wars, or diplomatic strains – investors seek safety in gold, thereby supporting its price,” Hansen added.
Moreover, the latest data from the World Gold Council showed that global physically backed gold ETFs reported strong inflows in March totalling US$8.6 billion, helping drive Q1 flows to the second-highest quarterly level in dollar terms, only behind the June quarter in 2020.
As a result, and aided by gold’s price increase, AUM reached another all-time high of US$345 billion, representing an increase of 13 per cent in March and 28 per cent through the first quarter.
