Major cryptocurrencies face persistent pressure this month, even as gold and silver rise.
These diverging trends reflect risks unique to digital assets, as growing concerns over government stability drive precious metals higher, highlighting strengthening investor confidence in traditional safe havens.
This month, bitcoin The largest cryptocurrency by market value, has fallen more than 9%, falling below the critical on-chain support level of $100,000, CoinDesk data shows. This weakness has spread throughout the crypto market, taking down important tokens like Ethereum’s ether. solarium and between 11% and 20%. Payments-focused XRP has shown relative resilience, falling just over 7%.
The weak tone comes even though the Dollar Index (DXY) rally lost momentum after encountering 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 precious metals.
However, while bitcoin remains depressed, precious metals have found strength; Gold and silver are up 4% and 9%, respectively, this month. Less followed precious metals such as palladium and platinum have also seen gains of more than 1%.
So what is 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. The Fed eases through the FOMC, China-US trade cooperation, and a now-resolved government shutdown,” Magadini told CoinDesk.
“Bitcoin traders have positioned themselves bullishly given strong fundamental backdrop for an EOY rally, but positioning is likely changing as the market was too long-positioned with no one to buy from 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 asset treasuries (DATs).
These entities have been a major source of upward pressure for cryptocurrencies over the past year, relying heavily on credit markets to finance their cryptocurrency purchases, often through convertible bonds and debt issuances. However, DATs are not alone in this competition for capital; They face increasing pressure as sovereign governments and AI-related companies compete for the same limited pools of credit.
With the recent surge in DAT formation, demand for credit has increased substantially, Magadini noted, adding that if credit markets tighten or freeze, these companies could find it difficult to refinance their obligations, forcing them to sell their currency holdings to meet debt payments. This forced sale could trigger a cascade, as subsequent DATs could also be pressured to liquidate their assets.
“As cryptocurrencies are sold, the next tranche of DAT could be forced to sell as well (and so on). Although this risk is less pronounced with quality assets (like BTC), the risk of downward spiral increases for DATs that recently bought volatile altcoins at a maximum valuation,” Magadini said.
“Today the market is probably thinking about this type of credit risk,” he said. (DATs are already facing the heat in the Far East.)
Explaining the gold boom
Precious metals have gained ground mainly due to growing concerns about the fiscal health of major economies, including the US.
Fiscal stress is evident in the rising public debt-to-GDP ratios of many advanced economies. For example, Japan’s proportion exceeds 220%, while that of the United States exceeds 120%. France and Italy also carry substantial debt burdens, exceeding 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 Economics and Development program at the Brookings Institution.
“The rally in precious metals is not about a dollar exit. It is a symptom of deeply failed fiscal policy, which is true globally, especially in the eurozone, where highly indebted countries control the ECB,” Brooks said in X.
Interestingly, gold has a history of leading BTC price movements. Analysis by market experts indicates that BTC tends to lag behind gold in about 80 days, suggesting that once the yellow metal’s rally finally stops, the cryptocurrency may receive a strong bid.
It remains to be seen whether this pattern holds in the current macroeconomic environment.
