Markets Crashed Overnight—Gold Recovered, Bitcoin Didn’t

Bitcoin sold off sharply early Friday Asian time, plunging more than 5% from $89,000 to a low of $83,400 during US daytime trading. Unlike gold and equities, it failed to recover—exposing a troubling identity crisis for the so-called “digital gold.”

The market is re-pricing trust in currencies and institutions, but that trust is flowing to gold vaults, not crypto wallets.

Same Storm, Different Outcomes

The sell-off was triggered by an escalation in US-Iran tensions after President Trump issued warnings on Truth Social, threatening military strikes unless Tehran agrees to a nuclear deal. Middle Eastern governments are attempting to push both sides into talks, but efforts have failed to gain traction as the US moves more firepower into the region. A looming government shutdown added to the risk-off mood.

Gold responded with extreme volatility, dropping 7% to $5,250 within an hour before staging a dramatic V-shaped recovery. The Kobeissi Letter noted that gold’s market cap swung by $5.5 trillion in a single session—the largest daily swing in history. By early Asian trading on Friday, spot gold had climbed back above $5,400, up around 1%.

US equities, meanwhile, showed resilience. The Nasdaq shed just 0.7%, weighed down by Microsoft’s 10% plunge on AI spending concerns. But Meta surged 10% on strong earnings, and the Dow closed slightly positive.

Bitcoin told a different story. It dropped to a low of $83,400 and managed only a tepid bounce to $84,200, far short of gold’s V-shaped recovery or tech’s selective rally.

A Mania in Precious Metals, but Not in Bitcoin

The divergence is stark. Gold has risen more than 25% this month alone, nearly doubling since Trump’s second term began a year ago. Silver has almost quadrupled since April’s “liberation day” tariffs, surging from below $30 to over $118 an ounce. Some analysts describe the price moves as parabolic, with all the hallmarks of a speculative mania.

Analysts say the precious metals rally reflects more than short-term stress—it signals eroding confidence in currencies, institutions, and the post-Cold War economic order.

Trump’s aggressive policies—punitive tariffs, threats against Greenland and Iran, and mounting pressure on the Federal Reserve, including a criminal case against Chair Jerome Powell—have driven investors toward traditional safe havens. The dollar fell to a four-year low against a basket of currencies on Wednesday.

Central banks have been adding to gold reserves as a modest diversification away from US Treasuries. Retail investors are piling in too, drawn by both the safe-haven narrative and simple momentum.

Structural Weakness Underneath

Yet Bitcoin, which shares gold’s theoretical appeal as a hedge against currency debasement, has not joined the buying spree.

The price action exposed vulnerabilities that had been building in crypto markets. Bitcoin spot ETFs have seen persistent outflows throughout January, with total assets declining from a peak of $169 billion in October to around $114 billion—a 32% drop.

The Coinbase Premium Index, which tracks the price gap between Coinbase and global exchanges and serves as a barometer for US institutional interest, has also turned negative. Both indicators point to a waning appetite among institutional buyers who drove much of the 2024-2025 rally.

Retail demand has contracted sharply, according to on-chain data. With both institutional and retail buyers stepping back, rallies struggle to sustain momentum while drawdowns become more violent.

On the retail side, on-chain data from CryptoQuant shows small transactions between $0 and $10,000 declining steadily, with 30-day demand growth falling from above 10% in October to around -6% now.

With both institutional and retail demand weakening, rallies struggle to sustain momentum while drawdowns become more violent.

What It Means

Wednesday’s session offered a real-time stress test. Gold proved it remains the market’s crisis hedge of choice. Tech stocks showed that strong fundamentals can override macro fears. Bitcoin did neither—absorbing the downside of risk assets while missing the upside of safe havens.

For the “digital gold” narrative to regain credibility, Bitcoin will need to demonstrate safe-haven behavior when it matters most. Until then, the label remains more aspiration than reality.