Major cryptocurrencies face sustained pressure this month, even as gold and silver rally.
These divergent trends reflect risks unique to digital assets as rising concerns over government stability drive precious metals higher, highlighting strengthening investor confidence in traditional safe havens.
This month, bitcoin the largest cryptocurrency by market capitalization, has fallen over 9% and is falling below the critical on-chain support level of $100,000, CoinDesk data shows. This weakness has spread across the broader crypto market, dragging down major tokens like Ethereum’s ether solana and by 11% to 20%. Payments-focused XRP has shown relative resilience, falling just over 7%.
The weak tone comes despite the dollar index (DXY) rally losing momentum after meeting resistance above 100 earlier this month. Typically, a fading DXY – which measures the US dollar against a basket of global currencies – bodes well for bitcoin and the broader crypto market, as well as for precious metals.
But while bitcoin remains subdued, precious metals have found strength; gold and silver are up 4% and 9% respectively this month. Lesser trace precious metals, such as palladium and platinum, have also seen an increase of over 1%.
So what’s holding bitcoin back? According to Greg Magadini, director of derivatives at Amberdata, much of the bullish news has already been priced in, leaving BTC vulnerable to bearish developments.
“After the government shutdown, risk assets sell off as all the ‘good news’ catalysts are used up. Bold easing via the FOMC, China/US trade cooperation and a now-resolved government shutdown,” Magadini told CoinDesk.
“Bitcoin traders have been bullishly positioned given a strong fundamental backdrop for an EOY rally, but positioning is likely being washed out as the market was positioned too long with no one to buy next,” he added.
Beyond positioning, fears of deeper systemic risk are also weighing on cryptocurrencies, Magadini explained, highlighting a potential credit freeze as a major risk for digital assets (DATs).
These entities have been a significant source of bullish pressure for cryptocurrencies over the past year, relying heavily on the credit markets to fund their crypto purchases, often through convertible bonds and debt issuance. However, DATs are not alone in this competition for capital; they face increasing pressure as sovereign governments and AI-related ventures compete for the same limited credit pools.
With the recent surge in DAT formation, demand for credit has increased significantly, Magadini noted, adding that if credit markets tighten or freeze, these companies may struggle to refinance their obligations, forcing them to sell their coin holdings to meet debt payments. This forced sale may trigger a cascade, as subsequent DATs may also be pressured to liquidate their assets.
“As crypto sells, the next tranche of DATs may also be forced to sell (so on and so forth). While this risk is less pronounced with quality assets (such as BTC), the downward spiral risk increases for DATs who recently bought volatile altcoins at peak valuation,” Magadini said.
“Today, the market is probably thinking about this type of credit risk,” he noted. (DATs already face the heat of the Far East.)
Explains gold’s recovery
Precious metals have gained traction mainly due to rising concerns about fiscal policy in major economies, including the United States
Fiscal pressures are evident in the rising government debt-to-GDP ratio in many advanced economies. For example, Japan’s ratio exceeds 220%, while the United States is above 120%. France and Italy also carry significant debt burdens of over 110%. While China’s public debt-to-GDP ratio is below 100%, its total non-financial debt exceeds 300% of GDP, making it one of the most indebted countries in the world.
The problem is particularly acute in the eurozone, according to Robin Brooks, senior fellow in the Global Economy and Development program at the Brookings Institution.
“The precious metals rally is not about a flight out of the USD. It is a symptom of deeply fractured fiscal policy, which is true globally, especially in the Eurozone, where highly indebted countries control the ECB,” said Brooks on X.
Interestingly, gold has a history of leading BTC price movements. Analysis by market experts indicates that BTC tends to lag behind gold by approximately 80 days, suggesting that once the yellow metal’s rally stalls, the cryptocurrency could receive a strong bid.
Whether this pattern holds in the current macroeconomic environment remains to be seen.
