Bitcoin No Longer Digital Gold? Gold and Silver Token Market Cap Hits Record $6 Billion

TradingKey - The scaling of tokenized gold will cause Bitcoin to lose its status as digital gold, but this is not necessarily a bad thing.

On Thursday (January 29), driven by a surge in gold ( XAUUSD) and silver ( XAGUSD) prices, the market capitalization of tokenized gold and silver surpassed $6 billion, hitting a record high. Among them, the market cap of tokenized gold exceeded $5.8 billion, while tokenized silver approached $500 million.

Tokenized gold and silver market capitalization, source: CoinGlass

A weakening U.S. dollar and escalating geopolitical tensions have fueled a surge in safe-haven demand, driving gold, silver, and other precious metal prices to new highs. As of press time, spot gold prices rose nearly 4% today, approaching the $5,600 per ounce mark and trading at $5,583; spot silver prices rose over 2% today, briefly breaking $120 per ounce and trading at $118.

Gold price chart, source: TradingView

In contrast, Bitcoin ( BTC ), often referred to as "digital gold," saw weak price performance. Ahead of the Federal Reserve's interest rate announcement, Bitcoin briefly broke $90,000 but failed to sustain its gains. After the Fed announced it would keep interest rates unchanged, Bitcoin prices continued to pull back, currently trading at $88,168.

Bitcoin price chart, source: TradingView

This year, gold prices have risen more than 28% cumulatively, while Bitcoin's gain is less than 1%, marking a significant divergence. The market may no longer recognize Bitcoin's safe-haven status, as evidenced by the influx of crypto market capital into tokenized gold today. In the future, tokenized gold is highly likely to replace Bitcoin as the true digital gold. This makes sense from an underlying logic perspective, as tokenized gold is essentially gold itself, simply circulating on-chain.

For investors, Bitcoin losing its safe-haven status and reverting to a risk asset is not necessarily a bad thing, as the higher volatility of risk assets satisfies investment or speculative demand. If Bitcoin's price volatility were very low, it would be no different from a stablecoin, which is likely not what market participants want.

Furthermore, Bitwise advisor Jeff Park believes that volatility is key to Bitcoin's upside. On January 28, Park posted, "Bitcoin is almost impossible to find upward momentum without experiencing significantly higher volatility." However, when will Bitcoin's price rise?

Currently, capital is continuously flowing into precious metals; for instance, Tether ( USDT) issuer Tether already holds 140 tons of gold, valued at over $20 billion. As long as gold and silver prices reach new highs, capital will continue to flow in, and Bitcoin prices will struggle to rise or may even fall. In other words, as long as gold and silver prices do not pull back, Bitcoin's price will struggle to move higher.