Bitcoin’s struggle to make a case for relevance has renewed doubts about its standing as a macro hedge, with analysts noting its inflation-hedging function is episodic and heavily influenced by risk appetite and equity-like factors.
Gold is topping $5,000. Stocks keep booming. The dollar is falling again. Yet Bitcoin — hailed as both a momentum and “debasement” trade — is sitting out the action. Its price is stalling, volumes are limp, and longtime believers are drifting toward more dependable markets like equities and precious metals.
The original cryptocurrency is hovering around $87,000 — down 25% since October and off 6% just in the past seven days. Investors have pulled more than $1.3 billion from Bitcoin-linked funds over the last week, according to data compiled by Bloomberg, part of a broader retreat from crypto ETFs. Those withdrawals follow a brief period of inflows in early January, suggesting sentiment has turned quickly after the new year.
By most macro measures, the backdrop should favor crypto — at least on paper. Easing inflation and interest rates typically bolster risk appetite, while looser financial conditions and rising geopolitical uncertainty have historically supported assets pitched as hedges against currency debasement. In past cycles, that mix often pulled capital into digital assets, whether as a momentum trade or a form of alternative money.
This time, it’s flowing the other way. Precious metals are drawing cash as investors seek shelter from geopolitical risk and a weakening dollar. Equities, particularly tech and small caps, are extending gains this year. Crypto, by contrast, has struggled to make a case for relevance. A JPMorgan Chase & Co. note last week pointed out that broad-based equity ETFs were posting some of their biggest intakes on record, while crypto vehicles were seeing outflows.
“It’s definitely a tough period for the industry in the face of these dynamics,” said Stephane Ouellette, chief executive officer and co-founder of FRNT Financial Inc. “There are many competing themes with crypto right now — from an innovation perspective AI has picked up considerable investment dollars in the last year and now it has been left out of the inflation trade. I think Bitcoin needs to show participants it can trade above at least $100,000 for a meaningful continuation of the bull market.”
The caution reflects more than just price. On-chain data from CryptoQuant shows Bitcoin holders have entered a sustained net realized loss phase — the first since 2023. More investors are locking in losses on their exits even without a collapse in spot prices, suggesting a quiet erosion of conviction. Open interest in Bitcoin futures — which make up the bulk of crypto trading volume — remains far below levels seen before the October selloff, when nearly $20 billion in market value was wiped out. Smaller tokens have seen even steeper drops in futures demand, according to Coinglass.
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Much of that caution traces back to the selloff that began in early fall, when sharp liquidations erased billions of dollars in crypto wealth and unsettled even seasoned participants. Many retail investors didn’t rotate within crypto; they stepped aside. That stall in momentum appears cultural as much as financial. The holding ethos that once defined crypto’s retail base has weakened. The speculative cycles that brought new participants into the ecosystem, from NFTs to meme tokens, have either collapsed or lost credibility. Some of that speculative energy has migrated elsewhere. Prediction platforms like Kalshi and Polymarket are reporting higher volumes, and decentralized equity futures venue Hyperliquid has seen rapid growth — all drawing from the same trader base that once powered crypto’s rise.
What remains is a thinner, quieter market, one still functional but increasingly detached from its earlier sense of urgency and possibility. The industry has weathered long silences before — and steep drawdowns with monikers like “crypto winter.” But in a year when nearly every other asset class is advancing, its absence feels newly conspicuous.
That’s renewed doubts about Bitcoin’s standing as a macro hedge. Even with global tensions surging, the asset often described as digital gold has stayed pinned. “Bitcoin is unlikely to replace gold as the preferred safe-haven asset of investors,” Cam Harvey, a professor at Duke University, wrote in the wake of the October drawdown. Analysts at Citigroup Inc. and crypto firm Tagus Capital reached similar conclusions recently, noting that Bitcoin’s inflation-hedging function is episodic at best — shaped more by liquidity, risk appetite and tech-stock flows than a durable link to dollar weakness or geopolitical stress.
Bitcoin’s “returns can respond to inflation surprises, easier monetary conditions, and fears of fiat debasement, but academic research shows this hedge is episodic, weaker than gold, and heavily influenced by risk appetite, liquidity, and equity-like factors rather than a stable link to dollar weakness,” Tagus analysts wrote.
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