In brief
- Investors are buying gold and silver as a hedge against fears of monetary debasement, macro uncertainty, and a potential misstep by the Fed.
- While U.S. equities are in a “late-cycle melt-up,” Bitcoin is in a “mid-cycle repair” following the October 10 liquidation event.
- Bitcoin has stabilized around the true market mean, a key on-chain level that typically marks the boundary between a correction and a deeper bear market.
Gold and silver continue to outstrip Bitcoin’s yearly performance, with traders betting on further uncertainty ahead of the U.S. Federal Reserve’s interest rate decision on December 10.
Silver and gold have returned an eye-watering 86% and 60%, respectively, according to data from Trading Economics. Bitcoin, meanwhile, has fallen into negative territory, at -1.2%, Yahoo Finance data shows.
A convergence of monetary debasement fears, macro uncertainty, and confused signals from the central bank is helping to push precious metals higher, Ryan McMillin, chief investment officer at Merkle Tree Capital, told Decrypt.
Investors are positioning for a potential Fed “policy error,” the analyst noted, a scenario where the central bank begins cutting rates while inflation remains stubbornly above its 2% target.
That specific fear centers on the risk of sticky inflation, McMillin noted, with key indicators like Core PCE—a measure of changes in the prices of goods and services—trending back toward 3% annually, particularly in services and housing.
The defensive rotation into hard assets has created a stark three-way divergence.
While metals surge, traditional risk-on equities have also rallied on their own merits. The Nasdaq and S&P 500 are up 21% and 16% year-to-date, respectively, while Bitcoin lags.
“Equities have been grinding higher in a very conventional way—earnings growth, buybacks, and an AI-driven capex story,” McMillin said.
Bitcoin, on the other hand, is nursing the October liquidation shock and the subsequent de-leveraging, ending its sustained uptrend following the ETF launch.
The result, he said, is that the S&P is experiencing a “late-cycle melt-up” while Bitcoin is in a phase of “mid-cycle repair.”
On-chain data also paints a more nuanced picture.
The total supply in loss has ticked up, signaling capitulation among short-term holders—a classic feature of a mid-cycle reset rather than a bear market, experts previously told Decrypt.
Though Bitcoin has dropped over 26% from its $126,080 record high, it has since stabilized around the true market mean, which is the cost basis of all non-dormant coins, excluding miners, according to Glassnode’s Thursday report.
The true market mean is the dividing line between a mild bearish phase and deeper bearish territory, according to general market theory.
Despite the current underperformance, McMillin expects Bitcoin’s disconnect to metals and U.S. equities to be temporary, forecasting that dynamic to eventually follow global liquidity and equity markets higher once its order books recover.
Bitcoin’s high sensitivity to macro shocks is likely to remain unless it can reclaim the 0.85 quantile, or roughly $106,200, Glassnode analysts wrote in their report.
The top crypto is down 1.3% over 24 hours and has been stuck in the $94,000 to $82,000 range for over two weeks, according to CoinGecko data.
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