Retail investors flock to gold and silver, abandoning Bitcoin.

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Against the backdrop of gold prices surging past $5,000, a booming stock market, and renewed weakness in the US dollar, Bitcoin, once seen as a tool for momentum trading and a hedge against currency depreciation, is missing from the festivities.

Cryptocurrencies are inferior to gold as a safe haven, and less appealing than AI in terms of risk, with decreasing capital attraction in the current market phase.

Bitcoin prices are stagnating, trading volume is sluggish, and long-term believers are shifting to more reliable markets like stocks and precious metals. Bitcoin is now hovering around $87,000, down 25% from its October high, and has fallen 6% in just the past seven days.

According to Bloomberg data, investors have withdrawn more than $1.3 billion from Bitcoin-related funds over the past week, continuing the trend of outflows from cryptocurrency ETFs.

In theory, the current macro environment should favor cryptocurrencies. Easing inflation and interest rates typically boost risk appetite, while loose financial conditions and rising geopolitical uncertainty have always supported assets touted as hedges against currency depreciation. Yet this time, BTC prices have not received meaningful support.

Funds Finding New Havens

On the safe-haven asset side, precious metals are attracting inflows, as investors seek refuge from geopolitical risks and a weakening dollar. On the risk asset side, driven by strong AI demand, stock EPS is rising noticeably and technology stocks continue to rally.

In comparison, cryptocurrencies are less robust than gold as a safe haven and less attractive than AI in terms of risk, with declining capital attraction at this stage of the market.

A JPMorgan report last week noted that broad-based stock ETFs are recording the largest inflows on record, while the cryptocurrency market is experiencing outflows.

"Given these dynamics, it's truly a tough time for the industry," said Stephane Ouellette, CEO and co-founder of FRNT Financial Inc. "Crypto now faces many competing themes—from an innovation perspective, AI has drawn massive investment over the past year, while crypto has now been excluded from inflation trades. I think Bitcoin will need to prove it can at least trade above $100,000 for a meaningful bull run to continue."

Faith Quietly Unravels

This caution is reflected not just in prices. On-chain data from CryptoQuant shows that Bitcoin holders have entered a net realized loss phase, the first time since 2023. Even without a spot price collapse, more investors are stopping out, indicating waning conviction.

Bitcoin open interest is far below levels before the October selloff, which wiped out nearly $20 billion in market value. According to Coinglass, futures holdings for smaller tokens have fallen even further.

Much of this caution dates back to the selloff that began last fall, when severe liquidations wiped out billions in crypto wealth and even experienced participants were hit. Many retail investors did not rotate within crypto, but chose to exit altogether.

This loss of momentum is both a funding and a conceptual issue. The holding faith that once defined retail crypto investors has eroded. From NFTs to meme tokens, the speculative cycles that brought new entrants into the ecosystem have either collapsed or lost credibility.

Some speculative demand has migrated elsewhere. Prediction platforms Kalshi and Polymarket have seen rising volumes, and decentralized contract trading platform Hyperliquid is also seeing rapid growth—all of which are attracting the same group of traders who once fueled crypto's ascent.

Macro Hedge Status Challenged

Bitcoin's recent sharp underperformance compared to gold has triggered doubts about its status as a macro hedge. Even as global tensions escalate, Bitcoin—often described as digital gold—remains stagnant. "Bitcoin is unlikely to replace gold as investors' preferred safe haven," wrote Duke University Professor Cam Harvey after the October pullback.

Analysts from Citi Group and crypto firm Tagus Capital have also come to similar conclusions recently, pointing out that Bitcoin's inflation-hedging function is at best sporadic—driven more by liquidity, risk appetite, and tech stock flows, rather than a lasting connection to dollar weakness or geopolitical stress.

What remains is a thinner, quieter crypto market—still operating, but increasingly detached from its earlier urgency and potential. Though the crypto industry has endured long silences and steep pullbacks before, its absence stands out in a year when virtually every other asset class is rallying.

Risk Warning and DisclaimerMarkets involve risk; investments should be approached with caution. This article does not constitute personal investment advice nor does it take into account individual users' unique investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions expressed herein fit their particular circumstances. Investment based on this is at your own risk.

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