Heightened geopolitical tensions are reshaping global capital flows, with gold remaining the preferred safe haven, while cryptocurrencies continue to trade like high-risk technology stocks rather than defensive assets, says digital asset fund manager Merkle Capital.
Recent flare-ups in the Middle East, particularly tensions involving the US and Iran, have pushed gold prices sharply higher, while digital assets have come under renewed selling pressure.
Despite long-standing narratives framing Bitcoin as “digital gold”, price behaviour suggests otherwise in the current environment, said Thanalop Preedamanoch, fund manager at Merkle Capital.
“When geopolitical risk rises, capital exits crypto markets alongside other risk assets, challenging the perception of crypto as a hedge during periods of uncertainty,” he noted.
According to Merkle, the outlook for crypto in the first half of 2026 is being shaped less by innovation and more by regulation. Two US bills, the Clarity Act and the Genius Act, could determine the market direction in the coming months, said Mr Thanalop.
The Clarity Act, which aims to establish clear legal definitions distinguishing securities from commodities among digital assets, has passed the House of Representatives and is being reviewed by the Senate. The bill’s path forward has become increasingly uncertain.
Coinbase, one of the most influential private sector supporters of the bill, has withdrawn its backing, citing concerns that the latest draft still imposes excessive constraints on the industry.
The debate centres on whether crypto tokens can legally share revenue or pay dividends to holders without being classified as securities. A clear framework would allow projects to design sustainable economic models while giving institutional investors confidence that they are operating within fully compliant boundaries.
Without such clarity, large pools of institutional capital are likely to remain on the sidelines, said Mr Thanalop.
Contentious issues remain unresolved, including regulatory oversight of decentralised finance protocols and restrictions preventing stablecoins from offering yield comparable to traditional bank deposits.
“If lawmakers and industry stakeholders fail to reach consensus, the Clarity Act could be delayed, amended significantly, or even fail to pass in its current form, removing a key potential catalyst for the crypto market in the second quarter,” he said.
The Genius Act, which governs stablecoin issuance, was approved in principle and is moving through the process of drafting secondary regulations. These rules are expected to be finalised by July 18.
The legislation allows banks and financial institutions to issue their own stablecoins on blockchain networks, potentially accelerating the mainstream adoption of on-chain finance. After the July deadline, markets may begin to see genuine bank-issued digital dollars, rather than reliance solely on private issuers such as Tether or Circle, noted Merkle.
The market continues to categorise crypto as a risk asset, said Mr Thanalop.
“As long as regulatory uncertainty persists and geopolitical tensions continue to drive investors towards traditional safe havens, gold is likely to attract a growing share of global capital flows,” he said.
A mid-year rally is likely, depending on the outcome of the US regulatory debate rather than technological breakthroughs, said Mr Thanalop.
“If the Clarity Act stalls or emerges in a form unacceptable to the private sector, expectations of a sharp crypto rebound may fade, reinforcing gold’s dominance as the asset of choice in an increasingly uncertain world,” he said.
As of Jan 29, gold significantly outperformed Bitcoin, with prices soaring by 15.1% to around US$5,600 per ounce. Bitcoin gained only 2.3% to trade around $89,500.
