Bitcoin's Struggle as 'Digital Gold' Amid Market Volatility

Bitcoin's Performance During Market Uncertainty

Bitcoin, theoretically a resilient asset in uncertain times due to its censorship-resistant nature, has recently seen a decline, becoming an asset investors offload when liquidity is required.

Geopolitical Tensions and Market Reactions

Recent geopolitical tensions, including threats of tariffs and potential military actions, have led to market pullbacks and increased volatility. Since January 18, following tariff threats, Bitcoin's value has dropped by 6.6%, whereas gold has surged 8.6% to new highs near $5,000.

Portfolio Dynamics in Stressful Times

Bitcoin's always-on trading and deep liquidity make it an accessible asset to sell quickly. In contrast, gold is typically held, not sold, enhancing its role as a 'safe haven'. This behavior positions Bitcoin more as an 'ATM' in crises, according to Greg Cipolaro, Global Head of Research at NYDIG.

"Under stress, liquidity preference dominates, impacting Bitcoin more than gold," Cipolaro stated. "In risk-off environments, Bitcoin is often sold to raise cash and de-risk portfolios, while gold acts as a liquidity sink," he added.

Impact of Large Holders

Central banks continue to buy gold, creating strong demand, whereas long-term Bitcoin holders are reportedly selling. Onchain data indicates a steady flow of Bitcoin to exchanges, suggesting ongoing selling pressure. This dynamic contrasts with gold, where accumulation persists.

Market Risk Perception

Current market risks are viewed as episodic, driven by policy threats and short-term shocks. Gold has historically hedged such uncertainties. Bitcoin, however, is more aligned with long-term issues like fiat debasement.

"Gold excels in immediate confidence loss, while Bitcoin suits long-term monetary and geopolitical concerns," Cipolaro noted.