Reasons for Bitcoin and Altcoins to Decline While Gold and Silver Rise

In recent times, while gold and silver have shown a strong upward trend, Bitcoin and altcoins continue to be under pressure. If the main reasons for this divergence are eliminated, the direction of crypto assets may reverse.

November has been quite tough for Bitcoin. Bitcoin lost more than 9% of its value throughout the month after losing the critical 100 thousand dollar support level. Leading altcoins in the market, such as Ethereum, Solana, and Dogecoin, experienced value declines ranging from 11% to 20%. Payment-oriented Ripple (XRP) saw a more limited drop of around 7%. Although the dollar index weakened, the weakness in the crypto market persisted, making the fragility of crypto assets more apparent.

On the other hand, there is a significant increase in precious metals, especially gold and silver. Gold rose by 4% this month, while silver increased by 9%, indicating a renewed demand for safe havens. Additionally, less followed precious metals such as platinum and palladium are also showing positive trends. This situation demonstrates that investors are moving away from risky assets towards safe havens.

Greg Magadini from Amberdata emphasizes that the pressure on crypto assets stems from two main factors: the deflation of overvalued expectations and the credit risk affecting digital asset trusts (DATs). According to Magadini, positive catalysts for a year-end rally have largely been priced in, and the accumulation of overly long positions has created an environment with no new buyers. This situation tends to lead to a sharp position clean-up.

Another important point is that in the past year, rapidly proliferating DATs have been making crypto purchases by borrowing more. In the event of tightening global credit conditions or a freeze in the financial system, these companies may feel the need to sell their crypto assets to service their debts. Significant value losses could occur, especially in highly volatile altcoins purchased at high prices. Magadini states that the markets have already priced in this risk.

The rise in gold and silver is emerging as a reflection of the deterioration in global financial balances. The debt levels of major economies have reached historic highs. In Japan, the debt-to-GDP ratio has surpassed 220%, while the U.S. economy bears a debt burden of more than 120%. In Europe, the debt levels of France and Italy are over 110%, and in China, total non-financial debt has exceeded 300% of GDP. This fragile financial landscape is leading investors to turn to gold and silver as safe havens.

According to historical data, it is known that Bitcoin follows the price movements of gold with approximately an 80-day lag. While some experts predict that when the gold rally cools down, a strong influx of demand may occur on the Bitcoin side, the current macro conditions are being closely monitored for how healthily this cycle will operate.