Gold has surged past $4,250 per ounce and silver is at all-time highs with over a 100% appreciation this year, dramatically outperforming Bitcoin as investors rotate toward traditional safe-haven assets while the Federal Reserve turns on the liquidity spigot.
Bitcoin sits roughly 26% below its October 2025 all-time high of $126,270, trading around $92,690 following a volatile start to the week that saw it crash to $84,000 on Monday before rebounding. This performance stands in stark contrast to precious metals despite conditions that historically have fueled cryptocurrency rallies.
The Federal Reserve officially ended quantitative tightening on December 1, marking a pivotal shift in monetary policy after withdrawing approximately $2.4 trillion from the financial system since June 2022. The central bank injected $13.5 billion into the banking system through overnight repurchase agreements this week – the second-largest single-day liquidity operation since the COVID-19 crisis and exceeding peak repo injections during the Dot-Com bubble.
The liquidity expansion represents exactly the type of monetary environment that has historically propelled risk assets. When the Fed floods the system with liquidity, real yields get pushed down as cash becomes less attractive, risk assets like stocks and crypto get bid up, and inflation hedges including gold, commodities, and Bitcoin typically outperform.
Yet while gold and silver are surging to new highs, Bitcoin's response has been tepid at best. Gold has gained approximately 60% year-to-date, benefiting from persistent geopolitical tensions, concerns about fiscal sustainability, and aggressive central bank buying. Silver's 102% surge reflects both safe-haven demand and industrial use cases in renewable energy and electronics manufacturing.
The divergence is particularly notable given that Fed officials have signaled more liquidity is coming. New York Fed President John Williams said in October the Fed will "soon grow its balance sheet again." Dallas Fed President Lorie Logan indicated that if repo rates keep rising, the Fed will need to "begin buying assets." Evercore has projected the Fed may need to buy up to $50 billion per month starting in early 2026.
This setup – falling real yields, expanding Fed balance sheet, and abundant liquidity – is precisely the environment that fueled Bitcoin's historic rallies in 2020-2021 and again in 2024. Yet cryptocurrency markets remain fragile, with Monday's selloff wiping roughly $140 billion from total market capitalization and triggering over $350 million in liquidations as leveraged positions unwound.
Total cryptocurrency market capitalization recovered to approximately $3.13 trillion by Wednesday, gaining back roughly $190 billion from Monday's lows following institutional endorsements from Bank of America and Vanguard . But the recovery has been hesitant compared to the steady, grinding rally in precious metals.
Manufacturing data released Monday showed the ISM Manufacturing PMI at 48.2, missing expectations and extending the contraction in industrial activity. While weaker economic data supports the case for eventual Federal Reserve rate cuts and more monetary accommodation, near-term economic weakness may be dampening risk appetite.
The rotation toward precious metals suggests investors are hedging against inflation and monetary debasement, but they're choosing the proven hedge over the digital alternative. Gold's rally past $4,250 represents new all-time highs, with technical analysts pointing to limited resistance levels ahead as the metal benefits from centuries of establishment as monetary insurance and central bank reserve accumulation.
Cryptocurrency advocates have long positioned Bitcoin as "digital gold," arguing it serves similar portfolio functions as a hedge against monetary debasement and store of value. The current divergence directly challenges that narrative – both assets should theoretically benefit from Fed liquidity expansion, yet traditional gold is capturing defensive capital while Bitcoin struggles to maintain momentum.
Blockchain data shows large cryptocurrency wallet holders have materially slowed accumulation, while smaller retail wallets continue adding at current levels – a pattern suggesting institutional conviction remains absent despite cheaper entry prices.
Wednesday's policy shifts from major financial institutions – with Bank of America joining Morgan Stanley, BlackRock, and Fidelity in recommending 1%-4% crypto allocations – may signal improving sentiment, but institutional money has yet to flow in meaningfully.
The contrast between asset classes highlights a critical question: if Bitcoin can't rally strongly when the Fed is ending QT and preparing to expand its balance sheet, what will it take to reignite the crypto bull market? The answer may lie in patience – liquidity takes time to flow through the system, and historical precedent suggests risk assets often lag the initial liquidity injections by several months.
Gold and silver are capturing the immediate inflation hedge premium. US equities are benefiting from improving liquidity conditions. But Bitcoin, despite its "digital gold" positioning and historical correlation with liquidity expansion, remains range-bound and volatile. Markets are pricing in an 87% probability of a Federal Reserve rate cut at the December 10-11 meeting, which could provide the next catalyst.
Whether cryptocurrencies can catch up to precious metals depends largely on Bitcoin's ability to reclaim narrative momentum as liquidity conditions improve. The Fed has opened the floodgates. The question is which assets will benefit most as that liquidity searches for a home. For now, centuries-old gold is winning the race against 15-year-old Bitcoin, even as both face the same monetary tailwind.
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