Over the weekend, markets were roiled after President Trump escalated trade rhetoric by threatening broad new tariffs on multiple European countries, a move tied to renewed geopolitical pressure related to the U.S.’s interest in Greenland. The announcement sparked a sharp risk-off reaction across global markets, with U.S. equity futures selling off, volatility rising, crypto moving lower, and precious metals soaring. While Trump later partially walked back the tariff threats, helping markets stabilize, a move that defines his negotiation tactics, the episode reinforced how abrupt policy rhetoric can still drive short-term volatility for crypto investors, even absent direct crypto-specific implications.
Frustratingly for crypto investors, the episode interrupted the budding momentum that had been building since the start of the year, a genuine gut punch for the market. Adding insult to injury, precious metals surged to new highs as capital rotated into traditional safe havens. And while the evolving geopolitical and macroeconomic backdrop would, in theory, favor an asset like bitcoin, market behavior has thus far diverged meaningfully from that narrative.
While bitcoin has not reliably served as a hedge against equity market drawdowns, a point we’ve examined extensively, it is nevertheless worth revisiting why bitcoin and the broader crypto market may be failing to attract greater support in the face of the unfolding macro and geopolitical developments.
Trapped in a Risk Asset Regime
We are no fans of bimodal market descriptors, risk-on or risk-off, but for whatever reason, it remains the most accessible framework for a broad investing audience, even if it obscures the influence of liquidity conditions, positioning, macro policy, and idiosyncratic flows. Viewed through that lens, bitcoin continues to behave more like a risk asset than a macro hedge: its rolling 90-day correlation with U.S. equities remains elevated, most recently registering around 0.51, underscoring the market’s tendency to trade crypto alongside equities during periods of heightened volatility.
Gold and the Institutional Playbook
While bitcoin has made meaningful inroads with institutional investors, family offices, and high-net-worth individuals, especially since the launch of spot ETFs 2 years ago, it still falls short of gold in terms of broad acceptance within professional portfolios. Gold benefits from decades of institutional precedent and a well-established role as a strategic allocation across market cycles, whereas bitcoin remains earlier in its adoption curve. As a result, many allocators continue to view bitcoin tactically rather than structurally, limiting its use as a portfolio hedge.
Liquidity Preferences Working Against Bitcoin
Under periods of stress and uncertainty, liquidity preference dominates, and this dynamic hurts bitcoin far more than gold. Bitcoin is highly liquid and tradable 24/7, making it one of the few assets that can be sold immediately when other markets are closed or impaired. Despite being liquid for its size, bitcoin remains more volatile and reflexively sold as leverage is unwound. As a result, in risk-off environments, it is frequently used to raise cash, reduce VAR, and de-risk portfolios regardless of its long-term narrative, while gold continues to function as a true liquidity sink.
Risk Duration Differences
There is a clear time-horizon mismatch between gold and bitcoin as hedges. Current geopolitical stress is being priced by markets as episodic, reversible, and ultimately policy-manageable, which favors assets that hedge near-term uncertainty rather than long-term regime change. This past week is a good example. Gold excels in moments of immediate confidence loss, war risk, and fiat debasement that does not involve a full system break. Bitcoin, by contrast, is better suited to hedging long-run monetary and geopolitical disorder and slow-moving trust erosion that unfolds over years, not weeks. As long as markets believe the present risks are dangerous but not yet foundational, gold remains the preferred hedge.
Large Seller Overhang
Last summer, we tracked the movement of coins tied to the so-called “July 4th Whale,” a large long-term holder that ultimately sold roughly $9 billion worth of bitcoin. While that episode was the most striking example of whale-driven selling, similar events are now commonplace. For example, earlier this week, $84 million of long-held bitcoin was moved, possibly to a service provider/exchange, another sign that large holders continue to distribute, weighing on market prices.
The opposite dynamic is playing out in gold. Large holders, particularly central banks, continue to accumulate the metal. While the U.S. may eventually pursue a comparable strategy with a strategic bitcoin reserve, there is currently no concrete plan in place.
Specter of 4-Year Cycles
Adding to these pressures is the specter of bitcoin’s four-year cycle, which continues to loom over investor sentiment. Despite structural improvements in market maturity, many participants remain conditioned by prior cycles in which post-halving strength ultimately gave way to a prolonged drawdown. We called this the "null hypothesis." As a result, concerns about a familiar pattern reasserting itself may be dampening risk appetite, encouraging profit-taking, and sidelining capital in the absence of a clear upside catalyst. In a tighter liquidity environment, this fear of repetition can become self-reinforcing, leaving bitcoin more vulnerable to negative macro developments and reinforcing its near-term underperformance relative to more established defensive assets like gold, even as its longer-term investment thesis remains intact.
