Why has the 'digital gold' myth failed this year?
Gold broke through $4,400 per ounce, while Bitcoin fell over 30% from its peak of $126,000. The market in 2025 provided a harsh answer: these two are simply not the same creature.
As an analyst who has been in the cryptocurrency field for many years, I must admit that the market trends of 2025 have surprised many, including myself, who are considered 'old hands'.
When gold achieved its best performance in 45 years with an annual growth rate of nearly 70%, the highly anticipated 'digital gold' Bitcoin dropped by 5%, struggling around $88,000.
Even more cruelly, investors who chased the price surge to $126,000 in October are now facing losses of over 30%. What is the truth behind all this? Let's uncover the mystery together.
01 Market Performance, Above and Below
The performance of gold in 2025 can be described as 'unbelievable.' Since the beginning of the year, gold prices have surged, setting more than 50 historical highs, and ultimately achieving an annual increase of over 60%, marking the strongest annual performance since 1979.
In late December, the price of gold broke through $4,400 per ounce, setting a new historical record.
In stark contrast to gold's brilliance, Bitcoin experienced a rollercoaster market in 2025. In early October, Bitcoin once soared to a historical high of $126,000, but then it entered a downward spiral.
By mid-December, Bitcoin had fallen below $86,000, down more than 30% from its historical peak, even erasing all gains made this year.
The panic sentiment in the cryptocurrency market is spreading. On December 16 alone, the total liquidation amount in the cryptocurrency contracts reached $603 million, with more than 184,600 people liquidated. Such market performance compels a rethinking of the fundamental differences between gold and Bitcoin.
02 Asset Attributes, Completely Different
On the surface, both gold and Bitcoin are referred to as 'store of value' tools, but the market performance in 2025 clearly reveals the fundamental differences between the two.
Gold is the true safe-haven asset, shining in times of global turmoil. When geopolitical tensions escalate, trade frictions intensify, or the dollar weakens or the Federal Reserve cuts interest rates, gold will shine.
In 2025, geopolitical events such as Ukraine attacking Russian tankers, the U.S. intensifying its oil blockade against Venezuela, and tensions in U.S.-China relations all provided momentum for the rise in gold prices.
At the same time, central banks around the world are continuously increasing their gold holdings. In the first half of 2025, the total amount of gold purchased by central banks reached 415 tons.
In contrast, Bitcoin is more like a liquidity-driven risk asset. It performs best in a globally abundant liquidity and strong market risk appetite environment. When expectations for Federal Reserve interest rate cuts rise and funding costs decrease, Bitcoin often performs strongly.
However, by the end of 2025, as market liquidity tightened, Bitcoin faced significant selling pressure.
A phenomenon that best illustrates the issue is that recent risk assets (such as U.S. stocks and cryptocurrencies) and traditional safe-haven assets (such as gold) have experienced synchronized declines. This indicates that the market is undergoing a deeper liquidity pressure test, forcing investors to sell all assets for cash.
03 Multiple Drivers Behind Gold's Surge
The extraordinary performance of gold in 2025 is not due to a single factor but rather a result of multiple favorable factors working together.
The continuous purchases of gold by central banks around the world are an important support for gold demand. Data from the World Gold Council shows that in the first half of 2025, global central banks purchased a total of 415 tons of gold, providing a solid foundation for gold prices.
Some analysts even predict that gold prices could further rise to $4,500-$4,900 in 2026, with more aggressive predictions suggesting that gold prices may break through the $10,000 mark before 2030.
The shift in Federal Reserve policy also supports gold prices. The market expects the Federal Reserve to continue cutting interest rates in 2026. For gold, which does not generate interest, a low interest rate environment reduces holding costs and enhances its attractiveness.
In addition, the global trend of 'de-dollarization' is also accelerating. More and more investors are worried that the ever-expanding debt scale will lead to a long-term depreciation of sovereign bonds and their denominated currencies, and thus turn to gold as a traditional store of value.
04 The Core Reasons Behind Bitcoin's Struggles
The current predicament of Bitcoin can be attributed to three core factors: tightening macro liquidity, outflows of institutional capital, and damaged market sentiment.
The marginal tightening of macro liquidity is the main driver behind the decline of Bitcoin. The shift in Federal Reserve policy expectations and the cooling of market rate cut expectations, along with rising funding costs, directly impact high-volatility assets. In a tight liquidity environment, investors often sell high-volatility assets like Bitcoin for cash.
Institutional capital outflows are also an important factor. Recently, cryptocurrency ETFs have seen consecutive net outflows, and some institutions and digital asset custodians have slowed their allocation pace. Institutional capital was once the core support for Bitcoin prices, but the net outflow of ETFs has exposed the fragility of its narrative logic.
Market sentiment has been severely impacted. The crash in mid-October led to one of the most severe liquidation events in history, damaging market confidence and accelerating deleveraging. In the absence of new capital entering the market, there is a lack of rebound momentum.
The expectation of interest rate hikes by the Bank of Japan has also added additional pressure. The market generally expects the Bank of Japan to raise the benchmark interest rate to 0.75%, which could lead to the unwinding of yen carry trades and further tighten global liquidity.
05 In 2026, Who Will Dominate?
Looking ahead to 2026, gold and Bitcoin may follow different paths.
The World Gold Council holds a cautiously optimistic view on the outlook for gold prices in 2026, believing that if the current situation continues, gold prices may fluctuate within a range. However, if economic growth slows and interest rates decline further, gold may rise moderately; whereas in the event of a significant economic recession due to rising global risks, gold could perform strongly.
Goldman Sachs predicts that gold prices could reach $4,900 in December 2026, while Morgan Stanley forecasts that gold prices will reach $4,500 in the second half of 2026.
For Bitcoin, CWG Markets believes that the trend in 2026 may be even more unpredictable than ever. The options market pricing reflects that traders see almost equal probabilities of Bitcoin hovering around $70,000 or $130,000 in mid-2026.
This huge range of predictions reflects the market's serious divide over Bitcoin's prospects.
However, in the long run, Bitcoin still has strong upside potential. CWG Markets expects that by the end of 2027, Bitcoin may reach $250,000. Bitcoin is gradually transforming into an investment tool that is closer to macro assets, with its volatility showing a long-term downward trend.
My view is that once the expectations for interest rate cuts are fully realized and global liquidity expands again, Bitcoin may experience a strong resurgence. The combination of lower funding costs and inflation expectations creates the best environment for Bitcoin's performance.
06 Investment Strategies and Recommendations
In the face of market uncertainties in 2026, how should investors position themselves?
For gold, the logic of being bullish in the medium to long term still holds. From the perspectives of monetary policy easing, safe-haven demand, reserve demand, and allocation demand, the overall trend remains positive for gold. Short-term adjustments may provide mid-term allocation opportunities.
For Bitcoin, investors need to have a stronger risk tolerance and a long-term perspective. Although short-term volatility is increasing, the long-term outlook for Bitcoin remains bright. Institutional adoption and the increasing maturity of the market will continue to drive its development.
Investors should avoid being fully invested in any single asset and manage their positions and funds wisely. It's reasonable to increase gold holdings but avoid being fully invested in gold, and keep a good control over position ratios. At the same time, based on factors like personal financial status, risk tolerance, and investment cycles, investors should choose their investment targets wisely.
The future market may continue to prove that gold and Bitcoin can play complementary rather than mutually exclusive roles in an investment portfolio. When the interest rate cut cycle fully lands in 2026 and liquidity returns to the market, Bitcoin may very well welcome its moment in the spotlight.
And at that time, will gold still be able to maintain its brilliance from this year? Let's wait and see.
How do you view the trends of gold and Bitcoin in 2026? Feel free to share your views and investment strategies in the comments!
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