Against a backdrop of gold prices breaching $5,000, a persistently booming stock market, and a weakening US dollar, Bitcoin, once hailed as a momentum trade and a hedge against currency devaluation, is conspicuously absent from the festivities. Cryptocurrencies are proving less attractive than gold for their safe-haven qualities and are being outshone by AI in the risk-asset category, leading to a declining appeal for capital in the current market phase. Bitcoin's price remains stagnant, with trading volumes languishing, as long-term believers pivot towards more reliable markets like stocks and precious metals. Bitcoin is currently hovering around $87,000, down 25% from its October peak and having shed 6% in just the past week. Data from Bloomberg indicates that investors withdrew over $1.3 billion from Bitcoin-related funds in the past week, extending a trend of outflows from cryptocurrency ETFs. Theoretically, the current macroeconomic environment should be favorable for cryptocurrencies. Easing inflation and interest rates typically boost risk appetite, while loose financial conditions and rising geopolitical uncertainty have historically supported assets marketed as hedges against currency devaluation. This time, however, BTC's price has failed to find effective support. Capital is seeking alternative destinations. On the safe-haven asset front, precious metals are attracting inflows as investors seek refuge from geopolitical risks and a weaker dollar. On the risk-asset side, driven by AI demand, stock earnings per share (EPS) have shown significant improvement, with tech stock gains continuing to widen. In contrast, cryptocurrencies are proving less attractive than gold for their safe-haven qualities and are being outshone by AI in the risk-asset category, leading to a declining appeal for capital in the current market phase. A JPMorgan report last week highlighted that broad-based stock ETFs are recording their largest inflows on record, while the cryptocurrency market is experiencing capital flight. "Facing these dynamics, it's indeed a challenging period for the industry," said Stephane Ouellette, CEO and Co-Founder of FRNT Financial Inc. "Cryptocurrencies now face many competing narratives—from an innovation perspective, artificial intelligence has attracted massive investment over the past year, while crypto is now excluded from the inflation trade. I think Bitcoin needs to prove to participants that it can at least trade above $100,000 to achieve a meaningful continuation of the bull market." The underlying conviction is quietly eroding. This caution is not only reflected in prices. On-chain data from CryptoQuant shows that Bitcoin holders have entered a phase of net realized losses for the first time since 2023. Even without a crash in spot prices, more investors are cutting losses and exiting, indicating a fading belief. Bitcoin's open interest remains significantly below levels seen before the October sell-off, which erased nearly $20 billion in market value. Data from Coinglass shows an even steeper decline in futures contract holdings for smaller altcoins. Much of the caution can be traced back to the sell-off that began in early autumn last year, when violent liquidations wiped out billions in cryptocurrency wealth, impacting even experienced participants. Many retail investors opted to exit the space entirely rather than rotate within the crypto ecosystem. This stagnation is both a matter of capital and ideology. The "hold" mentality that once defined the crypto retail base has weakened. From NFTs to meme tokens, the speculative cycles that brought new participants into the ecosystem have either collapsed or lost credibility. Some speculative demand has migrated elsewhere. Prediction platforms like Kalshi and Polymarket are seeing increased trading volumes, and decentralized contract trading platform Hyperliquid is experiencing rapid growth, all attracting the same type of traders that once fueled crypto's rise. Its status as a macro hedge is being questioned. Bitcoin's significant underperformance relative to gold in recent price action has raised doubts about its standing as a macro hedge tool. Even as global tensions escalate, this asset often described as digital gold remains mired in stagnation. "It is unlikely that Bitcoin will replace gold as the preferred safe-haven asset for investors," wrote Duke University Professor Cam Harvey following the October pullback. Analysts from Citigroup and crypto firm Tagus Capital recently reached similar conclusions, noting that Bitcoin's function as an inflation hedge is, at best, episodic—more influenced by liquidity, risk appetite, and tech stock flows than by any enduring link to a weak dollar or geopolitical pressure. What remains is a thinner, quieter crypto market that, while still functioning, feels increasingly detached from its earlier sense of urgency and potential. Although the crypto industry has previously endured prolonged quiet periods and sharp drawdowns, its absence is particularly conspicuous in a year when almost every other asset class is rallying.
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