Bitcoin underperforms as Gold, S&P 500 reach record high
- Bitcoin has underperformed compared to Gold and the S&P 500 since the February 3 market crash.
- Investors are rotating capital to Gold due to its quality as a safe haven in periods of macroeconomic uncertainties.
- Creating a Bitcoin strategic reserve could incentivize investors to allocate funds to the top crypto.
Bitcoin (BTC) traded above $98,000 on Thursday, continuing its range-bound movement, while traditional assets, including Gold and the S&P 500, set new highs. Meanwhile, asset manager VanEck noted that Bitcoin could help reduce the US national debt.
Bitcoin moves range-bound amid rise in Gold and stocks
Bitcoin moved above $98,000 on Thursday, following a dip toward $93,000 earlier in the week.
With its range-bound price movement in the past few weeks, the top cryptocurrency has failed to recover the $100,000 key level since the February 3 market crash triggered by global trade war tensions.
US President Donald Trump's plans to place tariffs on China, Canada and Mexico have remained a shadow over the crypto market.
As a result, investors have been shifting their attention away from crypto to Gold, which hit an all-time high of $2,954.69, and its market cap reached $20 trillion.
Gold's rise stems from its safe haven status as investors seek safety with recent macroeconomic uncertainties, including fears of a global trade war, the US debt crisis and rising inflation.
Bank of America's fund manager survey also shows that 58% of fund managers expect Gold to bring its best performance in a trade war, according to The Kobeissi Letter in a Thursday's X post.
This is truly incredible:
— The Kobeissi Letter (@KobeissiLetter) February 20, 2025
Gold prices are now officially up +50% over the last 14 months and made ANOTHER all time high.
In fact, gold's market cap just hit $20 TRILLION for the first time in history.
Why are people still piling into gold? Let us explain.
(a thread) pic.twitter.com/YCoIyUcUU8
Bitcoin has previously been viewed as a safe haven asset, fondly regarded as "digital gold." However, its recent price movement — especially since the introduction of Bitcoin ETFs — has seen it behave more like a risk asset.
Surprisingly, the S&P 500 is hitting new all-time highs alongside Gold. A rally in chipmakers' stocks largely drove the surge.
This indicates Bitcoin's year-long positive correlation with the S&P 500 is slowing down.
However, growing narratives in the US toward the creation of a strategic Bitcoin reserve could revert attention toward the top crypto.
If the government moves to establish a strategic reserve, it will imply that it acknowledges Bitcoin as a resilient asset.
Asset manager VanEck stated that the US could shed $21 trillion off its debt should it follow the Bitcoin Act path proposed by Senator Cynthia Lummis.
The Bitcoin Act proposes that the US Treasury acquire up to 1 million BTC over 5 years. The assets would be held in a Strategic Bitcoin Reserve for at least 20 years as a store of value to strengthen the nation's balance sheet.
"Our analysis suggests this reserve could offset around $21 trillion of national debt by 2049. That would amount to 18% of total US debt at that time," VanEck said in a statement on Thursday.
If the US government follows this path, it could cause investors to allocate funds to Bitcoin as they have done with Gold in recent weeks.
Cryptocurrency metrics FAQs
The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.
Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value.
Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.
Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.
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