Investors are increasingly purchasing gold and silver as a safeguard against growing concerns surrounding monetary debasement, macroeconomic uncertainty, and potential miscalculations by the U.S. Federal Reserve. This trend comes as U.S. equities enter what analysts describe as a “late-cycle melt-up,” while Bitcoin is experiencing a “mid-cycle repair” following a significant liquidation event on October 10.
Recent market data indicates that gold and silver have far outperformed Bitcoin this year, with traders anticipating ongoing volatility leading up to the Federal Reserve’s interest rate decision on December 10. According to figures from Trading Economics, gold and silver have seen remarkable returns of 86% and 60%, respectively. In stark contrast, Bitcoin has slipped into negative territory, registering a decline of 1.2%, as reported by Yahoo Finance.
Ryan McMillin, the chief investment officer at Merkle Tree Capital, highlighted that the rising prices of precious metals are bolstered by fears of monetary debasement, financial instability, and mixed signals from the central bank. Investors are wary of a potential “policy error” by the Fed—a scenario where interest rates may be lowered while inflation remains persistently above the 2% target. This anxiety focuses especially on the risk of “sticky inflation,” with key indicators like Core PCE—reflecting changes in prices of goods and services—hovering around 3% annually, particularly in sectors such as services and housing.
This shift into hard assets has resulted in a stark divergence within the markets. While precious metals soar, traditional equities have also been on the upswing due to various factors including earnings growth, stock buybacks, and advancements in artificial intelligence-driven capital expenditures. The Nasdaq and S&P 500 have seen year-to-date increases of 21% and 16% respectively, while Bitcoin lags behind.
According to McMillin, equities are climbing in a conventional manner, whereas Bitcoin is still reeling from the shock of recent liquidations and the subsequent de-leveraging phase, which disrupted its upward trend following the launch of exchange-traded funds (ETFs). As a result, the S&P 500 finds itself in a late-cycle surge, while Bitcoin is caught in a mid-cycle adjustment.
On-chain analysis further illustrates this complex scenario. The total supply in loss has increased, indicating capitulation among short-term holders—a trait typically associated with a mid-cycle reset rather than a full-blown bear market. Although Bitcoin has plummeted more than 26% from its record high of $126,080, it has managed to stabilize around the true market mean. This level, the cost basis for non-dormant coins, represents a critical boundary between a mild bearish situation and deeper downturns, as explained by market theory.
Despite its current underperformance, McMillin remains optimistic about Bitcoin’s future, predicting that its disconnection from precious metals and U.S. equities will be temporary. He anticipates that Bitcoin will eventually align with global liquidity and equity markets, especially as its order books recover. However, analysts from Glassnode indicated that Bitcoin’s high sensitivity to macroeconomic shocks is likely to persist unless it can reclaim the 0.85 quantile, approximately valued at $106,200. Currently, Bitcoin is down 1.3% over the last 24 hours and has remained trapped within the $94,000 to $82,000 range for more than two weeks, according to CoinGecko data.
