Against the backdrop of gold prices breaking through $5,000, a sustained stock market boom, and a weakening US dollar, Bitcoin, once seen as a momentum trade and a hedge against currency devaluation, has been absent from this feast.
Cryptocurrencies are inferior to gold in terms of safe-haven attributes and lag behind AI in risk attributes, leading to a declining appeal for capital in the current market phase.
Bitcoin's price has stagnated, trading volume is sluggish, and long-term believers are turning to more reliable markets like stocks and precious metals. Bitcoin is currently hovering around $87,000, down 25% from its October high and having lost 6% in the past seven days alone.
According to Bloomberg data, investors withdrew over $1.3 billion from Bitcoin-related funds in the past week, continuing the trend of outflows from cryptocurrency ETFs.
In theory, the current macroeconomic environment should be favorable for cryptocurrencies. Easing inflation and interest rates typically boost risk appetite, while loose financial conditions and rising geopolitical uncertainty have historically supported assets touted as hedges against currency devaluation. However, this time, BTC's price has not found effective support.
Capital Seeks Alternatives
On the safe-haven asset side, precious metals are attracting capital inflows as investors seek refuge from geopolitical risks and a weakening dollar. On the risk asset side, driven by AI demand, corporate EPS (earnings per share) has improved significantly, and tech stock gains continue to widen.
In comparison, cryptocurrencies are inferior to gold in safe-haven attributes and lag behind AI in risk attributes, leading to a declining appeal for capital in the current market stage.
A JPMorgan report last week noted that broad-based equity ETFs are recording the largest inflows on record, while the cryptocurrency market is experiencing outflows.
"Facing these dynamics, it is indeed a challenging time for the industry," said Stephane Ouellette, CEO and Co-Founder of FRNT Financial Inc. "Cryptocurrencies now face many competing themes—from an innovation perspective, artificial intelligence has attracted significant investment over the past year, and cryptocurrencies are now excluded from the inflation trade. I think Bitcoin needs to prove to participants that it can trade at least above $100,000 to achieve a meaningful continuation of the bull market."
Holding Conviction Quietly Eroding
This caution is reflected not only in the price. On-chain data from CryptoQuant shows that Bitcoin holders have entered a phase of net realized losses for the first time since 2023. Even without a crash in the spot price, more investors are cutting losses and exiting, indicating that conviction is waning.
Bitcoin open interest remains well below levels seen before the October sell-off, which wiped out nearly $20 billion in market capitalization. According to Coinglass data, futures holdings for smaller altcoins have seen even larger declines.
Much of the caution can be traced back to the sell-off that began in early autumn last year, when sharp liquidations wiped out tens of billions of dollars in cryptocurrency wealth, impacting even experienced participants. Many retail investors did not rotate within cryptocurrencies but chose to exit altogether.
This stagnation is both capital-driven and ideological. The holding conviction that once defined the cryptocurrency retail base has weakened. From NFTs to meme tokens, the speculative cycles that brought new participants into the ecosystem have either collapsed or lost credibility.
Some speculative demand has migrated elsewhere. Prediction platforms like Kalshi and Polymarket are seeing increased trading volume, and decentralized contract trading platform Hyperliquid is also experiencing rapid growth, all attracting the same traders who once fueled the rise of cryptocurrencies.
Macro Hedge Status Questioned
Bitcoin's significant underperformance relative to gold's price action recently has raised questions about its status as a macro hedge tool. Even as global tensions escalate, Bitcoin, often described as digital gold, remains stagnant. "Bitcoin is unlikely to replace gold as investors' preferred safe-haven asset," wrote Duke University Professor Cam Harvey after the October pullback.
Analysts at Citigroup and cryptocurrency firm Tagus Capital recently reached similar conclusions, noting that Bitcoin's function as an inflation hedge is, at best, sporadic—more influenced by liquidity, risk appetite, and tech stock flows than by any enduring link to dollar weakness or geopolitical stress.
What remains is a thinner, quieter crypto market, still functioning but increasingly detached from its early sense of urgency and potential. Although the crypto industry has experienced prolonged periods of dormancy and sharp drawdowns before. Its absence is particularly conspicuous in a year when almost every other asset class is rising.
