Bitcoin's Sharp Decline Ignites Store of Value Debate
The cryptocurrency market is experiencing significant turbulence, with Bitcoin prices witnessing a dramatic drawdown of nearly 25% this month. The digital asset fell to a low near $80,500 last Friday, causing approximately half a trillion dollars in value to be wiped out. Although a minor rebound to $86,000 occurred, the sell-off has been severe, impacting the entire altcoin market as well.
What's Driving the Bitcoin Sell-Off?
According to a Bloomberg report, this slump is primarily fueled by spot selling. Key factors include redemptions from large exchange-traded funds (ETFs), long-dormant wallets suddenly offloading their holdings, and a noticeable fading of demand from momentum traders.
Kunal Shah, Head of Commodity Research at Nirmal Bang, provides a macroeconomic perspective. He states that Bitcoin acts as a mirror reflecting the global liquidity scenario. Shah points out that the collapse coincides with Japanese 10-year and 30-year bond yields hitting their 20-year highs. "Generally, when the fixed-income market witnesses such turbulence, there is a flight of capital from risk to safety. And that is what is happening. And that is the main reason why Bitcoin has collapsed the way it has collapsed," he explained.
Is Gold Poised to Benefit from Crypto Carnage?
While Bitcoin stumbles, gold has managed to hold its ground, leading to renewed comparisons between the two perceived stores of value. However, the narrative from 2025's gold rally tells a different story. This year's strength in bullion has been driven by macro forces like rate-cut expectations, a softer US dollar, strong ETF inflows, and persistent central-bank buying.
Most analysts are skeptical that Bitcoin's fall will directly translate into a major bullish run for gold. They argue that gold prices have already run up and discounted most of these positive fundamentals. Kunal Shah issued a warning: "We believe that gold is likely to consolidate further, and the upside is going to be very restricted in the near term. The fundamentals of gold are not bullish at all. It has run up way ahead of its fundamentals."
This sentiment was reflected in Monday's early morning trade, where MCX gold futures fell nearly 1% as immediate triggers faded. With Federal Reserve rate cut expectations dimming and the US dollar regaining strength, the gold rally has taken a pause after a spectacular nearly 50% gain in 2025 alone.
Future Outlook and Key Price Levels for Gold
Looking ahead, the outlook for gold remains cautiously positive. Ross Maxwell, Global Strategy Lead at VT Markets, said further upside is dependent on new developments. "Deeper monetary easing, renewed geopolitical shock or significantly weaker real yields, would all factor into future pricing for gold," he noted, while also highlighting risks like a firmer USD or a pull-back in central-bank buying.
Prathamesh Mallya, DVP Research at Angel One, provides specific targets. He suggests gold has the scope to move to $4,500 (₹1,36,000) over the next 12 months, while on the lower side, it could test $3,500 (₹1,11,000). He believes factors like central bank accumulation and geopolitical tensions could still fuel a structural bull run.
Maxwell advises investors to treat gold as a diversification tool rather than a short-term hedge, recommending a modest allocation of 5-10% with opportunities to add during price dips if conditions are favorable.
