Investors Favor Precious Metals as Bitcoin Stalls Amid Fed Policy Concerns
Investors are increasingly hedging against potential Federal Reserve policy errors by buying gold and silver, while Bitcoin has lagged behind. Year-to-date, silver has risen 86% and gold 60%, compared to a 1.2% decline in Bitcoin, according to Yahoo Finance.
Markets are pricing in the risk of the Fed cutting rates despite inflation remaining above target, with the core Personal Consumption Expenditures (PCE) index near 3%. This has resulted in a three-way divergence where precious metals and U.S. equities have rallied — the Nasdaq is up 21% and the S&P 500 up 16% year-to-date — while Bitcoin has declined.
On-chain data indicates a rise in total supply held at a loss, signaling capitulation among short-term Bitcoin holders and a mid-cycle reset. Bitcoin is down about 26% from its all-time high of 126,080 and currently trades near the true market mean, which reflects the cost basis of non-dormant coins excluding miners. This true market mean is regarded as the dividing line between mild bearish conditions and deeper bear markets.
For more than two weeks, Bitcoin has traded within a range of 94,000 to 82,000, experiencing a roughly 1.3% drop over 24 hours. Analysts expect Bitcoin's current disconnect from metals and equities to be temporary and forecast a realignment with liquidity and equity markets as order books recover. Notably, Bitcoin’s prior uptrend ended following the launch of the Bitcoin ETF.
