In brief
- Analysts say Bitcoin’s drawdown reflects positioning and liquidity stress, though views diverge on whether demand will return as metals cool and macro uncertainty persists.
- Gold and silver’s sharp reversal has prompted some investors to reassess crowded metals trades, with Bitcoin holding relatively steady by comparison.
- On-chain data shows limited whale accumulation and subdued ETF flows, suggesting the market has cleared leverage but lacks a clear catalyst for renewed upside.
Bitcoin’s latest sell-off is sharpening a familiar market debate over whether the move reflects short-term positioning and liquidity stress, or signals a deeper erosion of Bitcoin’s thesis as a store of value.
Analysts broadly agree the drawdown is cyclical rather than structural, but diverge on what comes next and whether Bitcoin is still positioned to absorb capital rotating out of traditional refuges amid macro uncertainty and dollar strength.
After Friday’s sharp reversal in metals, when gold slid, and silver posted one of its steepest single-day drops in decades, Bitcoin held relatively steady. Some observers began reassessing whether the recent metals trade had become crowded.
Bitcoin has since found a temporary footing, up 3.8% on the day to $78,800, according to CoinGecko data. It remains down 13.6% over the last 30 days.
While Bitcoin was previously seen as a “beneficiary of strength in gold,” capital that “may have flowed to crypto off such moves instead funneled to silver in recent months,” Martin Gaspar, senior crypto market strategist at FalconX, wrote in an investor note on Monday.
“This could revert as silver cools off,” Gaspar warned.
Gaspar pointed to policy and flow-driven catalysts that could shape Bitcoin’s near-term trajectory. In the weeks ahead, he said, traders are focused on developments around the U.S. crypto market structure bill.
On the flows side, the analyst said investors are watching for signs of industry support to stabilize the market, pointing to Binance’s plan to convert about $1 billion from its SAFU fund into Bitcoin and to Tether's gold buys.
Zerocap, an Australia-based digital asset trading and investment firm, said Tuesday it holds a “constructive long-term view” on Bitcoin, arguing it retains store-of-value advantages over gold despite its fragile near-term positioning.
The firm claimed price action around the world’s largest crypto is “driven more by liquidity and risk management than structural stress,” with Bitcoin acting as a liquidity-sensitive asset rather than showing signs of forced selling.
Alex Thorn, head of firmwide research at Galaxy Digital, offered a more cautious read.
Bitcoin’s current slide shows liquidation-driven weaknesses, with “little evidence of significant accumulation from whales or long-term holders,” Thorn wrote, noting that long-term holder profit taking “has begun to notably abate.”
Conviction and purpose
Analysts in conversation with Decrypt largely agree that Bitcoin’s sell-off reflects short-term positioning and liquidity, while differing on how likely capital is to rotate back into crypto.
While Bitcoin’s sell-off could be “driven by short-term positioning and liquidity,” instead of “weakening fundamentals,” a rotation into metals indicates “macro allocation shifts rather than capitulation,” Vincent Liu, chief investment officer at Kronos Research, told Decrypt.
The thesis behind Bitcoin being a store of value “remains intact with strategic holders holding conviction,” Liu noted. A rotation from metals into crypto could happen later in the year, he noted.
“As time passes, Bitcoin seems to be absorbing the downsides of gold, while gold is absorbing the advantages of Bitcoin,” Siwon Huh, researcher at Four Pillars, told Decrypt.
Gold has “improved its liquidity through tokenization” and is now being “connected to yield farming and collateralized lending via DeFi,” Huh said.
Huh noted how the metals market has exhibited extreme volatility and recorded its largest drop in 40 years. “The spillover from this massive sell-off spread to the highly leveraged crypto market, precipitating the current situation,” he said.
Other analysts say Bitcoin needs a clearer, defensive use case to reclaim its role as a store of value.
“We need to define the purpose of a ‘store of value.’ It is a refuge when other assets are expected to decline,” Ryan Yoon, senior research analyst at Tiger Research, told Decrypt.
Bitcoin ETFs, for instance, make Bitcoin “highly accessible,” Yoon said, noting that “many data companies fail to create a trend of reasons to save Bitcoin, giving it a gambling image.”
“We need the next El Salvador, and we should hope that the backlash against the impending strong dollar regime will be directed toward Bitcoin, not gold,” he said.
A silver lining?
On-chain data offers one potential silver lining, though not the metals rotation some analysts expect.
Over 22% of Bitcoin’s circulating supply sits at a loss following January’s slide, according to a Glassnode report. The condition could amplify downside pressure as options dealers hedge by selling into falling prices, reinforcing the move lower.
For now, that rotation appears to be too weak to reverse the pattern. Spot ETF flows are near zero, while options markets are pricing more downside protection, suggesting traders see risk without necessarily believing Bitcoin serves as a safe haven, as analysts point out.
The silver lining emerges alongside the market's clearing of leverage-driven sellers without panic, leaving the price dependent on whether new demand or policy can actually shore up support, analysts told Decrypt.