Today there was a rather heartbreaking piece of news in the crypto circle: Bitcoin's market capitalization has been surpassed by silver.
The price once dipped below $118,000, and its ranking among global mainstream assets has fallen to 8th place. This might sound a bit awkward, as we’ve been calling it 'digital gold' for so many years. In the short term, this title indeed seems a bit hard to uphold.
In contrast, gold just hit a new high today, and the comparison between rises and falls is particularly stark. Brothers, open your market software and you'll see that gold has risen from $1,900/ounce to $2,100 in less than half a month, while Bitcoin has been sluggishly falling from $124,000 for almost a month.
The 'sense of security' from real gold and silver can't be compared to Bitcoin for now.
To put it simply, once the global macroeconomic environment becomes unstable, funds are still more willing to flow into physical precious metals. Why?
Firstly, the consensus accumulation is different. Silver and gold, as safe-haven assets, have thousands of years of history. Not to mention our generation, even our ancestors would stock up on some real gold and silver in times of turmoil. Bitcoin, however, has only a decade or so of history; to put it bluntly, it's still a 'rookie'. In the eyes of older investors, no matter how hot it gets, it can't compare to the solid gold bars in their hands.
Secondly, the volatility is vastly different. In the past few days, silver's volatility has only been around 2%, and gold even less than 1%, while Bitcoin can easily drop 5% in just one night. Yesterday morning's sharp drop saw $3,000 wiped off in half an hour; this rollercoaster experience is unbearable for conservative funds. Think about it, pension funds and insurance companies would rather earn a bit less than endure such volatility; when they withdraw, can Bitcoin not fall?
Thirdly, there is regulatory certainty. The trading system and regulatory rules for silver and gold have long matured. It's clear where to buy, how to sell, and who to turn to in case of problems. Bitcoin, on the other hand, is still 'wrestling' with regulations. One moment the SEC is investigating this exchange, and the next it's defining that token as a security. Funds are always afraid of stepping on landmines. This uncertainty is especially deadly when the macroeconomic environment is unstable.
Why is Bitcoin's 'risk-hedging attribute' always questioned?
This is not the first time Bitcoin has been criticized as having a 'false risk-hedging attribute'. During the Fed's interest rate hike in 2022, Bitcoin dropped from $69,000 to $15,000, with a decline even harsher than the stock market; in March of this year, when Silicon Valley Bank collapsed, gold rose by 5%, while Bitcoin first dropped by 8% before rebounding.
Ultimately, the current investor structure in Bitcoin is still dominated by speculative funds. Lao Ma looked through on-chain data and found that addresses holding Bitcoin for less than 3 months account for over 60%. These funds run away at the first sign of trouble; where is the 'risk-hedging' determination in that? In contrast, data from silver ETFs shows that over 70% of the funds are long-term holdings of more than six months, which naturally provides different resilience to downturns.
In addition, recently WLFI has absorbed quite a bit of capital, and Bitcoin's liquidity was already a bit tight. A slight disturbance can easily cause significant price fluctuations. Yesterday morning's drop was due to an institution placing a sell order of 5,000 Bitcoins at the $118,000 position. The market couldn't handle it and it broke through directly; this liquidity fragility is also why large funds are hesitant to take heavy positions.
Where is market sentiment at?
Currently, the community is clearly divided into two factions: the old investors think 'it's hit the bottom, time to buy', while the new players shout 'Bitcoin is done for, run quickly'. In fact, from the sentiment indicators, the fear and greed index has already dropped to 28, close to the 'extreme fear' zone, which is often a market low point, but it also indicates a heavy wait-and-see sentiment.
In the short term, funds may continue to flow towards more stable traditional assets. After all, the results of the Fed's interest rate cuts are still pending, and global economic data is fluctuating. During such times, no one dares to take risks easily. Like yesterday, a fan in foreign trade said he exchanged 30% of his Bitcoin for silver ETFs, with a very practical reason: 'At least if silver drops, I can still melt it down into silver to make a bracelet; if Bitcoin drops, it's really gone.'
What Lao Ma wants to say is:
The path of Bitcoin as 'digital gold' may be longer than expected. It does have the potential to disrupt traditional finance, but before consensus is fully established and regulations are clear, it is actually normal for it to be abandoned by funds during macroeconomic turbulence.
But from another perspective, this is also a reminder from the market: don't put all your eggs in one basket. Like this wave of market movement, keeping some gold and silver assets, along with some Bitcoin and Ethereum, may make the volatility feel less painful.
What do the brothers think about this? Do you think Bitcoin can regain the title of 'digital gold'? Let's talk in the comments! Follow Lao Ma, and tonight in the live stream we will thoroughly discuss the underlying logic of this capital flow.
