After experiencing an 'epic crash' in gold, cryptocurrency investors are in complete turmoil — London gold spot prices plummeted from a high of $5,598 per ounce, crashing down by $670 within 30 hours, hitting a low of $4,884, with a 12% drop marking the largest since 1983.
A trillion dollars in safe-haven funds are hastily fleeing the gold market; can the cryptocurrency market become a new home for this capital? Is this wave of market movement an opportunity or a trap? Let's let the data speak, without any nonsense.
First, understand why gold has collapsed so severely. The core reasons are twofold: policy shift + leverage squeeze. At the Federal Reserve's interest rate meeting, Powell clearly stated, 'We are not in a hurry to cut rates until inflation shows signs of cooling.' The probability of a rate cut in March plummeted from 30% to 13.5%, and coupled with rumors of Trump nominating hawkish figures to lead the Federal Reserve, the market panicked.
More critically, since the beginning of the year, gold has risen nearly 30%. With large profit-taking combined with algorithmic trading, after breaking below the key level of $5,400, stop-loss orders were triggered like dominoes, directly causing a panic sell-off during the weak liquidity period at night. In simple terms, this wave of gold decline is due to a change in policy expectations + a technical breakdown, rather than a disappearance of risk aversion demand.
Looking at the core linkage signal between the cryptocurrency sector and gold—correlation. From 2021 to now, the correlation coefficient between the two has reached as high as 0.879, with trends basically in sync, but in January 2026, this key indicator has dropped to zero, seemingly about to turn negative.
This is not a small matter; historical data shows that whenever the correlation between Bitcoin and gold turns negative, the average increase in Bitcoin over the next two months can reach 56%. This is a strong signal of capital shifting from traditional safe-haven assets to digital assets.
More importantly, the capital absorption capacity of the cryptocurrency sector has already emerged: during the same period of gold's sharp decline, cryptocurrency funds absorbed $2.17 billion in just one week, setting a record for the largest inflow since 2026, of which Bitcoin ETF accounted for $1.55 billion, and Ethereum also attracted nearly $500 million. Institutions like BlackRock and Grayscale are increasing their positions, indicating that large funds are quietly positioning themselves.
But don’t just focus on the positives; the risk points also need to be clear. Firstly, the correlation between Bitcoin and the Nasdaq is still as high as 0.7, far exceeding its correlation with gold.
If the Federal Reserve really continues to tighten liquidity, high-risk assets like tech stocks and the cryptocurrency sector may come under pressure simultaneously, and funds may not blindly flow into the cryptocurrency sector.
Secondly, the sentiment in the cryptocurrency sector has not fully recovered; on January 21, the Fear and Greed Index just dropped to 24, which is in the 'extreme fear' range. In 24 hours, $120 billion in market value evaporated, and 182,000 traders were liquidated. Under such sentiment, even if there is capital inflow, it may first experience fluctuations before a direct surge, which is not easy.
There’s another key detail: this time the decline in gold is due to high-level profit-taking, while the cryptocurrency sector has already undergone a correction and its valuation is relatively reasonable. Institutional funds choose Bitcoin ETF as the main channel for inflow, indicating a preference for core assets rather than niche coins. This means that even if the market starts, it is likely to be a structural opportunity rather than a broad market rally.
