Gold hits an all-time high, but Bitcoin faces $1.8 billion in liquidations: Is the digital gold narrative facing a major challenge?

As the price of gold soared to a historic high of approximately $3790 per ounce on September 23, the Bitcoin market suffered a heavy blow. Over the past week, the price of Bitcoin has been on a downward trend, triggering a massive liquidation wave amounting to $1.8 billion, with long positions liquidations reaching $1.65 billion, affecting more than 407,000 traders. This starkly different trend has sparked profound questioning in the market regarding the narrative of "Bitcoin as digital gold," highlighting the different performances of the two assets as safe-haven tools amidst increasing macroeconomic uncertainty.

Macroeconomic Environment Changes: Divergence Between Gold and Bitcoin Trends Intensifies

Recently, the trends of gold and Bitcoin have shown a clear divergence. On September 23, the price of gold reached a historical high, while Bitcoin continued to decline over the course of a week. Industry analyst Shawn Young pointed out that this round of sell-off is a typical manifestation of structural vulnerability in the crypto market during periods of leverage accumulation. He emphasized that when Bitcoin fell below the key threshold of 112,000 USD, approximately 407,000 traders were liquidated.

Young added, "After the Federal Reserve cut interest rates, the dollar unexpectedly strengthened, catching the market off guard. The strengthening of the dollar, combined with high treasury yields and imminent inflation data, has kept the cryptocurrency market on the defensive." This change in the macro environment, especially the strong rebound of the dollar, has had a starkly different impact on gold and Bitcoin.

The "Safe-Haven" Moat of Gold: Geopolitical Confrontation with Digital Assets

Farzam Ehsani, CEO and co-founder of VALR, believes that the different responses of gold and Bitcoin to the strength of the US dollar are likely due to gold's more established position as a geopolitical risk hedge. He pointed out that when the dollar strengthens, Bitcoin struggles to fulfill its role as "digital gold."

Ehsani further analyzes the sharp divergence in the trends of gold and Bitcoin, reflecting a shift in market priorities. The surge in gold prices is attributed to ongoing purchases by central banks and its inherent status as a geopolitical safe-haven asset. Although Bitcoin has made significant progress in terms of regulation and institutional adoption, its acceptance among institutions is still in the early stages and has yet to fully establish a "safe haven" credibility comparable to gold. According to data from StatMuse, as of this year, gold prices have risen by 42.7%, while the return on Bitcoin during the same period is only 20.7%.

Conclusion

The significant divergence between gold and Bitcoin poses a severe challenge to the narrative that "Bitcoin is digital gold." It reminds investors that, despite Bitcoin's scarcity and decentralized characteristics, its status as a safe-haven asset has not yet been fully established, especially during times of heightened macroeconomic and geopolitical uncertainty. Gold, with its long-standing safe-haven status and continued favor from central banks, remains the undisputed "safe haven" in the traditional financial world. For crypto investors, understanding the unique roles of these two assets in different market environments is crucial.

Disclaimer: This article is for informational purposes only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make decisions with caution.