Gold’s record rally finally blinked this week, and Bitcoin traders are waiting to see what happens next.
Spot gold soared to an all-time high of $5,594.82 an ounce before falling to around $5,330 as investors took profits, down about 4.7% from its all-time high.
The Kobisi Letter noted that the volatile price movements of precious metals led to a $5.5 trillion fluctuation in its market capitalization, the largest in history.
At the same time, Bitcoin fell 7% to around $82,381, reflecting a split-screen moment for the two assets, which are often marketed as “hard money” hedges.
Therefore, the important question for crypto markets is not whether gold can correct itself after a near-vertical move.
The question is whether gold’s decline will catalyze a rotation, freeing up capital, attention, and narrative space for “degraded trading” that could later flow into Bitcoin, or whether it signals a macro regime that will put pressure on both assets.
Gold, crowded macro trading
Gold’s rise has been fueled by a powerful combination of geopolitical risks, policy uncertainty and a weaker dollar.
The precious metal’s surge above $5,000 was driven by a rush into safe-haven assets, with the metal gaining an extraordinary 64% in 2025, its biggest annual gain since 1979.
Notably, large-scale ETF demand has also strengthened market positioning.
Eric Balchunas, senior ETF analyst at Bloomberg, pointed to the historical nature of the current volume. According to him:
“GLD trading volumes are the most impressive, exceeding the old all-time record by approximately 50%.
This follows a World Gold Council report that physically backed gold ETFs will attract $89 billion in 2025, bringing global gold ETF assets under management to a record $559 billion and holdings to a record 4,025 tonnes.
In analyzing the factors behind this trend, the WGC emphasized “momentum buying,” along with lower opportunity costs due to lower U.S. bond yields and a weaker dollar. These conditions could quickly reverse if interest rates or the dollar rebound sharply.
Meanwhile, the speed of gold’s uptrend is now showing in its volatility. The CBOE Gold ETF Volatility Index (GVZ) rose from 30.01 on January 23rd to 39.67 on January 28th.
This sharp change is the highest level since 2020 and is often accompanied by forced risk aversion when trading is crowded.
$39 trillion referendum
At record prices, the total “above ground” value of gold is rising relative to some of the biggest benchmarks in global finance.
The World Gold Council estimates that approximately 216,265 tonnes of gold has been mined throughout history. At about $5,088 per ounce, that means the value of above-ground gold is about $36 trillion.
This number is surprisingly close to the $38.54 trillion total U.S. government debt recorded on January 28th.
This comparison is important because it frames gold’s rally as more than just a commodity squeeze. Market analysts said this appeared to be a macroeconomic “balance sheet” trade, or a referendum on sovereign debt and currency credibility.
If that framework is what attracted marginal buyers to gold, there is no need for gold’s decline to undermine the theory.
Bitcoin analyst Joe Consorti said:
“Gold is about to surpass the $38.5 trillion US debt. This is what a global monetary reset looks like.”
So, as this gold correction unfolds, it could cause a reassessment of where to place price decline hedges, especially now that Bitcoin is starting to become more mainstream than in past cycles.
How narrative handoff works
In the case of Bitcoin as a subsequent beneficiary, it is based on portfolio mechanics and correlations rather than a simple “gold goes down, BTC goes up” mentality.
ARK Invest noted that the correlation between Bitcoin and gold since 2020 has been low (0.14 using weekly returns), suggesting that the top cryptocurrency may act as a diversifier compared to traditional asset allocation.
In particular, while a low correlation does not guarantee an uptick, it does support a scenario where gold can go up even if Bitcoin doesn’t mechanically follow.
This creates room for later “catch-up” trades if capital is directed back towards higher convexity hedges.
On the other hand, there is also a “narrative handoff” effect. The soaring price of gold is a very visible expression of financial instability.
If that uncertainty persists, but gold trading appears stagnant, Bitcoin becomes an obvious alternative risk bucket for investors who prefer liquidity and 24/7 pricing.
Interestingly, Bitcoin analyst James Van Straten noted that the flagship digital asset is currently trending in the red against gold for six consecutive months.
This pattern is the same as observed in 2018 and 2019, after which BTC produced five consecutive monthly green candlesticks.
Capital rotation to Bitcoin
A useful way to model the next step is to treat the decline in gold as a signal and ask what macro factors are behind it.
In a “gentle unwind” scenario, gold cools due to profit taking that washes out leverage and volatility spikes (such as a jump in GVZ). In this path, the macro background of liquidity expectations and a weak dollar will not reverse.
As a result, Bitcoin will initially lag, but may catch up as investors take risks in “digital hard asset” trading again.
Mr. Jiaoao Wesong, CEO of AlphaRactal, said:
“Once gold enters the Buy Climax (BC) stage, the next move is usually a sharp decline.”
Wesson noted that after such a correction, gold typically enters a sideways consolidation phase, after which risk assets such as Bitcoin tend to react positively. He added:
“Historically, this phase unfolds over several months and appears to align closely with the historical fractal that Bitcoin has followed throughout the cycle, a window in which large institutional investors actively reallocate to Bitcoin.”
However, if gold’s decline reflects widespread deleveraging across risk markets, Bitcoin often behaves as a high-beta asset and could fall along with equities before recovering.
This is a path where Bitcoin as a macro hedge can lose the first battle but win the second once the funding situation stabilizes.
Meanwhile, the most bearish path for both assets would be a stronger dollar and higher real interest rates.
ARK Invest’s outlook makes fun of the strong dollar regime by comparing the US policy situation to the early days of Reaganomics, when the dollar soared. In this scenario, downside trading will decline and Bitcoin’s upswing will become more dependent on crypto-native catalysts.
ARK Invest’s Cathie Wood warned that “today’s bubble is in gold, not AI,” suggesting that a rally in the dollar could burst that bubble.
He pointed out that the ratio of gold to the US money supply (M2), which is approximately $22.69 trillion, has recently reached levels reminiscent of the 1980s and the Great Depression.
However, if the correction in gold proves to be orderly and the macro factors that caused the hard asset bid remain intact, Bitcoin could be next.
But it does not work as a golden mirror. Rather, it will be an expression of the same underlying financial instability with higher market volatility.