As geopolitical tensions escalated in recent days, following former President Donald Trump’s threats of tariffs against NATO allies concerning Greenland and speculations regarding potential military action in the Arctic, financial markets exhibited a marked pullback, accompanied by increased volatility. In this turbulent environment, Bitcoin, often touted as a resilient asset during times of uncertainty, has not held up as expected.
Since January 18, the date Trump first made his tariff threats, Bitcoin has experienced a decline of 6.6% in value. In stark contrast, gold has surged by 8.6%, reaching near all-time highs close to $5,000. This divergence raises questions about the roles and perceptions of these two asset classes during periods of market stress.
The disparity in performance can be attributed to how each asset is integrated into investor portfolios amid crises. Bitcoin, characterized by continuous trading, high liquidity, and rapid settlement times, is easy for investors to sell when urgent cash needs arise. Gold, while also valuable, tends to be held more consistently by investors who look to retain it rather than liquidate it during tough times. As a result, Bitcoin is emerging as more of an “ATM” for investors facing financial pressures, which undermines its reputation as “digital gold,” according to Greg Cipolaro, the Global Head of Research at NYDIG.
Cipolaro highlighted that in times of stress, the preference for liquidity often prevails, disproportionately affecting Bitcoin compared to gold. While Bitcoin is relatively liquid for its size, its inherent volatility makes it prone to being sold off as investors unwind leveraged positions. Consequently, during risk-off phases, it becomes a go-to asset for raising cash, thus shifting focus away from its long-term narrative. Conversely, gold continues to serve as a “true liquidity sink.”
The current market dynamics are further complicated by the behaviors of large investors. Central banks are accumulating gold at historic levels, fostering considerable structural demand. In contrast, long-term Bitcoin holders have begun selling, as indicated by reports from NYDIG. Onchain data suggests that older Bitcoin, referred to as vintage coins, is moving toward exchanges, indicating a persistent selling trend. This creates a “seller overhang,” putting downward pressure on Bitcoin’s price.
Market perceptions also play a critical role. The ongoing volatility is perceived as temporary, largely attributable to immediate factors such as tariffs and fluctuating policies, which historically have not disrupted confidence in the financial system as fundamentally as crises of a broader nature. Gold has long been regarded as a reliable hedge in such scenarios, whereas Bitcoin is seen as more appropriate for addressing long-term risks, including concerns over fiat currency devaluation and prolonged geopolitical instability.
Cipolaro noted that gold excels in times of immediate confidence erosion, war risks, and swift shifts in fiat security. Bitcoin, on the other hand, is better positioned to serve as a hedge against gradual declines in trust and prolonged monetary instability. As long as investors view the current risks as significant yet not fundamentally threatening, gold is likely to remain the preferred investment safeguard.
