The Two Worlds of Bitcoin and Gold

If we were to select the "most neglected" asset since the beginning of the year, bitcoin would certainly be on the list. There was a time when bitcoin was lauded as "digital gold," but now it’s clear to everyone that gold is just gold, and once you add "digital" to the front, its essence changes.

Since the start of the year, bitcoin has dropped 22%. If calculated from the peak in Q4 2025, the cumulative decline has reached 45%. In comparison, gold has risen by 18% since the start of the year. The two major trending assets of recent years are showing increasingly different trends.

Why did bitcoin plunge? The main reasons are several cases of bitcoin being confiscated or seized, which shook the underlying logic of cryptocurrencies (decentralization, privacy) (see How Bitcoin's Crash Affects Gold Investment?). In recent months, bitcoin ETFs have continuously seen net capital outflows, with a cumulative net outflow of $2 billion since the beginning of the year.

Last year, the market was once worried about increasing complexity of gold capital and a decline in its safe-haven properties. Because a lot of risk-seeking funds from the US stock and bitcoin markets flowed into the gold market, there were concerns that a drop in US stocks or bitcoin could drag down gold and reduce its value as a safe haven. However, judging from the current bitcoin adjustment cycle, even though bitcoin ETF flows continue to see outflows, overall gold ETFs are still seeing net inflows—sometimes larger, sometimes smaller. Overall, gold has not been significantly affected by liquidity spillover.

Meanwhile, some major players in the cryptocurrency market continue to increase their gold holdings. For example, stablecoin giant Tether has gold reserves reaching 143 tons by the end of 2025, surpassing South Korea's national gold reserves. Moreover, it is reported that Tether is purchasing gold at a rate of 1-2 tons per week.

In my view, the reason why bitcoin has adjusted significantly while gold remains relatively firm and unaffected by liquidity spillover is largely due to the inflow of allocation-driven capital. Essentially, bitcoin and gold exist in two different worlds.

With the New Year approaching, many friends are concerned about whether to hold cash or positions during the holidays. I personally lean towards holding positions; gold is relatively stable, and it's best to add some options protection for silver.

Wishing you all the best and see you after the holidays!

To summarize today's sharing:

1. If we were to select the "most neglected" asset since the beginning of the year, bitcoin would surely be on the list. In recent months, bitcoin ETFs have continued to experience net capital outflows, with a cumulative net outflow of $2 billion since the start of the year, while gold ETFs overall are still seeing net inflows;

2. Last year, the market was concerned about increased complexity in gold capital and a decline in its safe-haven properties. However, based on the trend of this cycle, gold has not been affected by liquidity spillover due to bitcoin's plunge. On the contrary, some major players in the cryptocurrency market (such as Tether) are still increasing their gold holdings. Essentially, the gold market still sees allocation-driven capital inflows, and bitcoin and gold are in two separate worlds; 

3. Hold cash or positions during the holidays? I tend to hold positions. Gold is relatively stable, and it's best to add some options protection for silver. Wishing you all the best, and see you after the holidays!