Major cryptocurrencies face continued pressure this month, even as gold and silver rebound.
These divergent trends reflect risks unique to digital assets, as growing concerns over government stability propel precious metals higher, underscoring increasing investor confidence in traditional safe havens.
This month, Bitcoin the largest cryptocurrency by market value, fell more than 9%, falling below the critical on-chain support level of $100,000, according to CoinDesk data. This weakness spread across the entire crypto market, causing major tokens like Ethereum’s ether to fall. Solana And from 11 to 20%. Payments-focused XRP showed relative resilience, down just over 7%.
This weak tone comes despite the dollar index (DXY) rally losing momentum after encountering resistance above 100 earlier this month. Generally, a declining DXY – which measures the US dollar against a basket of global currencies – bodes well for bitcoin and the broader crypto market, as well as precious metals.
However, even though bitcoin remains subdued, precious metals have regained strength; gold and silver rose 4% and 9% respectively this month. Less followed precious metals, such as palladium and platinum, also saw gains above 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 are selling off as all the ‘good news’ catalysts are used. Fed easing through the FOMC, China/US trade cooperation, and the government shutdown now resolved,” Magadini told CoinDesk.
“Bitcoin traders have been bullishly positioned given the strong fundamental backdrop for an EOY rally, but their positioning is likely being altered as the market was positioned too long with no one to buy next,” he added.
Beyond positioning, fears of deeper system risk also weigh on cryptocurrencies, Magadini explained, highlighting a potential credit freeze as a major risk for digital asset treasuries (DATs).
These entities have been a significant source of upward pressure for cryptocurrencies over the past year, relying heavily on credit markets to fund their cryptocurrency purchases, often through convertible bonds and debt issuances. However, DATs are not alone in this competition for capital; they face growing pressure as sovereign governments and AI-related companies compete for the same limited credit reserves.
With the recent increase in DAT formation, the 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 holdings in coins to satisfy their debts. This forced sale could trigger a cascade, as subsequent DATs could also be forced to liquidate their assets.
“As crypto is sold, the next tranche of DATs could be forced to sell as well (and so on). While this risk is less pronounced with quality assets (such as BTC), the risk of a downward spiral increases for DATs that have recently purchased volatile altcoins at peak valuation,” Magadini said.
“Today the market is probably thinking about this type of credit risk,” he noted. (DATs are already facing heat in the Far East.)
Explaining the rise in gold
Precious metals gained ground, mainly due to growing concerns about the fiscal health of major economies, including the United States.
Fiscal stress is evident in the soaring public debt-to-GDP ratios of many advanced economies. For example, Japan’s ratio exceeds 220%, while that of the United States exceeds 120%. France and Italy are also heavily indebted, exceeding 110%. While China’s public debt-to-GDP ratio is less than 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, a senior fellow in the Global Economy and Development program at the Brookings Institution.
“The precious metals rally is not due to a flight out of the dollar. It is a symptom of deeply broken fiscal policy, which is true globally, particularly in the Eurozone, where highly indebted countries control the ECB,” Brooks said on X.
Interestingly, gold has historically been one of the biggest price movers in BTC. Analysis from market experts indicates that BTC tends to lag gold by around 80 days, suggesting that once the yellow metal’s rally stalls, the cryptocurrency could see strong supply.
It remains to be seen whether this trend will persist in the current macroeconomic environment.
