Why Bitcoin and Altcoins Decline While Gold and Silver Rise

In recent periods, while gold and silver have shown a strong rise, Bitcoin and altcoins continue to be under pressure. If the main reasons for this divergence are eliminated, the direction of crypto assets could change.

November was quite tough for Bitcoin. Bitcoin lost more than 9% in value throughout the month after losing the critical 100 thousand dollar support level. Major altcoins like Ethereum, Solana, and Dogecoin experienced value losses ranging from 11% to 20%. Payment-focused Ripple (XRP) saw a more limited decline, falling around 7%. Despite the dollar index losing strength, the weakness in the crypto market continued, making the fragility of crypto assets more apparent.

On the other hand, there has been a significant rise in precious metals, especially in gold and silver. Gold increased by 4% this month, while silver showed a 9% rise, indicating a renewed demand for safe-haven assets. Additionally, less-followed precious metals like platinum and palladium are also showing a positive trend. This situation suggests that investors are moving away from risky assets and towards safe havens.

Greg Magadini from Amberdata emphasizes that the pressure on crypto assets is largely due to two key factors: the fading of excessively priced expectations and credit risks affecting digital asset treasuries (DATs). According to Magadini, the positive catalysts for a year-end rally have largely been priced in the markets, creating an environment where excessive long positions cannot find new buyers. This situation tends to cause a severe position cleanout.

Another important issue is the rapid increase in DATs over the past year, which have been making crypto purchases by taking on more debt. In the event of tightening global credit conditions or a freeze in the financial system, these companies may need to sell their crypto assets to manage their debts. Significant value losses could be seen in high-volatility altcoins purchased at high prices. Magadini states that the markets have priced this risk in advance.

The rise in gold and silver is highlighted as a reflection of the deterioration in global financial balances. Debt levels in major economies have reached historical peaks. Japan's debt-to-GDP ratio has exceeded 220%, while the US economy carries a debt burden of over 120%. In Europe, France and Italy's debt levels are above 110%, and in China, total non-financial debt has surpassed 300% of GDP. This fragile financial landscape has led investors to turn to gold and silver as safe havens.

Historical data shows that Bitcoin's price movements tend to follow gold prices with a delay of about 80 days. While some experts predict that a strong influx of demand may occur in Bitcoin when the rally in gold cools down, the health of this cycle is being carefully monitored given the current macro conditions.