The Difference Between Bitcoin and Gold: Market's "51 Error Code" Analysis

Price movements that emerge during geopolitical tensions over the past two weeks can be characterized as a “51 error code” in the markets. While Bitcoin lost 6.6% of its value, gold rose by 8.6% during this period, providing a concrete example that digital assets have failed to serve as traditional safe havens. The underlying reasons for this trend, which began on January 18, point not only to market sentiment but also to how each asset class behaves systematically during stress periods.

The Power of Liquidity Preference During Stress Periods

At the core of this “51 error code” in the markets lies investors’ approach to evaluating liquidity during crises. Continuous trading of Bitcoin, its deep liquidity, and instant settlement enable it to function like an ATM. When uncertainty increases, investors seeking to quickly risk-off their portfolios may prefer Bitcoin as their first selling instrument.

In contrast, gold generally acts as a more held asset due to access restrictions. Greg Cipolaro, NYDIG’s Global Research Director, explains this dynamic: “During periods of stress and uncertainty, liquidity preference takes precedence, and this dynamic impacts Bitcoin much more negatively than gold. Despite its size, Bitcoin remains liquid but continues to behave more volatilely and is reflexively sold when leverage is unwound.”

According to Cipolaro, this behavioral pattern reveals Bitcoin’s true role as digital gold during panic periods. In risk-averse environments, Bitcoin is often used to increase cash holdings and risk-off the portfolio, regardless of its long-term narrative. Meanwhile, gold continues to serve as a genuine liquidity buffer.

Contrasting Dynamics of Central Banks and Long-Term Holders

Another significant factor shaping the market is the opposing behaviors of major players. Central banks continue to purchase record levels of gold, creating strong structural demand. According to NYDIG data, long-term Bitcoin holders are selling. On-chain data shows that old coins continue to move toward exchanges, indicating a persistent selling flow. This “excess supply” dynamic weakens price support.

Cipolaro adds, “The opposite dynamic is happening in the gold market. Especially central banks and large holders continue to accumulate metal. Large institutional demand strengthens gold’s price support.” This asymmetry plays a key role in explaining the performance gap between the two asset classes during stress periods.

Short-Term Perception and Pricing of Geopolitical Risks

Speculations about Trump’s tariff threats to NATO allies via Greenland and potential military operations in the Arctic illustrate how markets are currently assessing turbulence. Viewing these risks as short-term, episodic events supports gold’s pricing but weakens Bitcoin.

Gold functions as a traditional hedge against short-term shocks such as tariffs, policy threats, and sudden loss of confidence. Cipolaro states, “Gold performs best during moments of sudden loss of confidence, war risk, and systemic collapse without a complete breakdown of fiat currency.” He emphasizes that Bitcoin is designed as a different asset class: “In contrast, Bitcoin is more suitable for protecting against long-term monetary and geopolitical deterioration, with slow erosion of trust emerging over years rather than weeks.”

This distinction indicates that markets do not yet see the current risks as fundamental and will likely continue to prefer gold.

The Paradox of Dollar Weakness and Bitcoin’s Position

Another unexpected development is that Bitcoin has not shown a rally parallel to the weakening of the US dollar. JPMorgan strategists analyze this situation, noting that dollar weakness does not stem from structural macro factors.

According to strategists, the dollar’s decline is driven not by changes in growth or monetary policy expectations but by short-term flows and market sentiment. They do not foresee the US economy strengthening and the currency gaining stability.

Since markets do not perceive the current dollar decline as a permanent macro shift, Bitcoin is functioning more as a risk asset sensitive to liquidity rather than a reliable dollar hedge. During this period, the preferred beneficiaries of dollar diversification have been gold and emerging markets rather than Bitcoin.

Finally, for markets to correct these behavioral deviations, a structural change in risk perception or a sharp increase in long-term macro uncertainties would be necessary. For now, gold and short-term protective instruments will continue to be the preferred actors during stress periods.