Gold, traditionally viewed as a stable store of value, experienced a sharp market correction this week, with its market capitalization plunging by $2.5 trillion—an amount exceeding the entire value of Bitcoin.
Gold’s steepest decline in a decade
According to The Kobeissi Letter, the gold market saw an 8% decline over two days, marking its largest drop since 2013.
This dramatic correction followed a 60% rally earlier in the year and has caused significant concern among investors who had turned to gold amid inflationary pressures and market uncertainty.
Alexander Stahel, a Switzerland-based resources investor, commented on the rarity of such an event:
“Gold is giving us a lesson in statistics. FOMO caused the latest leg up. Now, profit taking and weak hands got shaken out.”
Stahel added that, historically, drops of this magnitude have occurred only 21 times since 1971.
Comparing with bitcoin’s volatility
While Bitcoin is often criticized for its volatility, gold’s recent crash demonstrates that even so-called safe-haven assets are not immune to large drawdowns.
Veteran trader Peter Brandt noted that the decline in gold was equivalent to 55% of the value of all bitcoin in existence.
Bitcoin itself dropped about 5.2% from its recent intra-day high but saw daily losses of just 0.8% at the time of reporting, according to Coinbase data.
Fear and greed index signals extreme caution
The correction in gold coincided with a sharp fall in the Bitcoin Fear & Greed Index, which has dropped to levels not seen since December 2022, indicating a period of extreme fear in the broader digital asset market.
Despite this sentiment, U.S. spot Bitcoin ETFs recorded $142 million in inflows on the same day.
Parallels between gold and bitcoin
Deutsche Bank analysts have recently drawn parallels between gold and Bitcoin as stores of value, noting that both assets have reached new highs in nominal terms, though gold surpassed its inflation-adjusted all-time highs only in early October.
This ongoing comparison continues to shape the narrative around Bitcoin’s role as “digital gold.”
