"Hurry up and look, silver has hit a new high again!" Old Wang at the next table excitedly slapped his thigh; this was a common scene in the trading hall last week. While precious metal investors cheered for the crazy rise of silver, I was quietly adjusting my cryptocurrency positions.
As an analyst who has been deeply involved in the cryptocurrency market for many years, I sense the breath of market rotation. When the rise of precious metals like silver, palladium, and platinum is primarily driven by short squeezes, the market often comes fiercely but is also short-lived.
And now, various signs indicate that the 'short squeeze frenzy' in precious metals is nearing its end, and smart money is quietly positioning itself in Bitcoin and Ethereum.
01 The Madness of Silver: The Truth Behind the Short Squeeze
Recently, the precious metals market has indeed been bustling. Silver broke through the $50 per ounce mark, and platinum and palladium also saw increases. However, this surge is not entirely supported by fundamentals.
The London silver market is currently facing a liquidity crisis. The freely circulating silver inventory has decreased by 75% compared to 2019, while the daily trading volume is as high as 250 million ounces, creating a structural contradiction of “physical shortage and trading inflation” that has become a hotbed for short squeezes.
Even more crazily, to alleviate the pressure of the run on the London market, traders are even willing to spend $1 per ounce on air freight to transport silver from New York to London, setting a record for the largest single-day withdrawal in more than four years.
The overnight leasing rate for silver once soared to a historical high of 200%, reflecting the market's extreme thirst for physical silver. In this situation, the price increase driven by short squeezes resembles a kind of “passive increase” rather than a healthy bull market performance.
02 The “Seesaw Effect” Between Precious Metals and Cryptocurrencies
Historical data shows that there is often a “zero-sum game” relationship between gold and Bitcoin. When the precious metals market experiences a pullback, the cryptocurrency market often benefits.
JPMorgan recently reported that over the past three weeks, gold ETFs have seen outflows, while Bitcoin and cryptocurrency ETFs have attracted inflows. This rotation of funds is particularly evident when market uncertainty increases.
In April 2025, when gold prices dropped nearly 8% from a peak of $3500, Bitcoin's price rose by 18% during the same period. This contrast clearly demonstrates the switching of funds between the two major safe-haven assets.
The formation of this “seesaw effect” mainly has two reasons: one is that investors seek diversified hedging tools amid global uncertainty; the other is that the audiences for both are different, and the volatility of precious metals can drive some speculative funds to shift towards the crypto market.
03 Signals Are Present: Early Signs of Loosening Precious Metal Markets
The precious metals market, especially silver, has begun to show signs of weakness. On October 21, the spot gold price plummeted over 6%, falling below $4100 per ounce; the spot silver decline even expanded to 8.7%, dropping below $48 per ounce.
The market is always ahead of the curve. I discovered a key indicator: the largest gold ETF (SPDR Gold Trust) has reduced its holdings by 8.01 tons to 1038.92 tons, reflecting that some speculative funds are withdrawing from the gold market.
Meanwhile, the US dollar index remains strong, and the Fed's interest rate cut expectations have cooled, further suppressing the performance of precious metals. Historical experience shows that in an environment where the dollar strengthens and real interest rates rise, precious metals often perform poorly.
More importantly, when precious metals begin to pull back, their volatility will significantly amplify. This is because programmatic trading triggers a large number of stop-loss orders when prices fall below key support levels, accelerating the downward trend.
04 Cryptocurrencies Are Poised to Take Off
In contrast to the commotion in the precious metals market, the cryptocurrency market has recently appeared unusually calm. However, behind this calmness, institutional funds are quietly positioning themselves.
Data shows that the stablecoin issuer Tether holds over 116 tons of gold, valued at approximately $14 billion, making it one of the largest single gold holders after major central banks. This indicates that the boundaries between the crypto world and traditional finance are increasingly blurring.
Although Bitcoin's recent price hovers below $90,000, several institutional analysts believe that if gold prices can reach $5000, Bitcoin could soar to $155,000 or even higher. This prediction is based on historical performance, as Bitcoin's gains are often multiples of gold's when gold rises.
The market always progresses in cycles. Some analysts point out: “When silver climbs to a fourteen-year high while Bitcoin experiences huge fluctuations, investors need to think about who is the true haven in times of economic uncertainty?”
05 Investment Strategy: How to Respond to the Upcoming Rotation?
In the face of potential market rotation, I suggest adopting a “two-legged approach” strategy:
On one hand, remain vigilant about holdings in precious metals, especially silver-related positions. Set strict stop-loss levels, with gold focusing on the $3900 per ounce support level and silver on the $47 per ounce defense line. If it breaks below, consider reducing positions.
On the other hand, establish cryptocurrency positions in batches. Bitcoin and Ethereum remain the top choices, but attention can also be given to altcoins with real application scenarios. Currently, Bitcoin's price is below $90,000, providing a good entry point for long-term investors.
For aggressive investors, considering crypto concept stocks as an alternative may be worthwhile. However, be cautious of high risks from companies like MicroStrategy, where the proportion of Bitcoin holdings to total assets reaches as high as 67%, far above the industry average.
The market will never lack opportunities; what is lacking is the eye to discover them. When most people chase hot assets, smart money has already positioned itself for the next windfall. The madness of silver will eventually fade, while the feast of cryptocurrencies may just be beginning.
“It's time to shift attention from precious metals to cryptocurrencies.” This is not only my advice as a senior crypto analyst but also an inevitable logic of market cycle operations. Don't forget to click to follow.@币圈罗盘 Let's grasp the pulse of market rotation together!
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