While Bitcoin's Absolute Value Is Questioned, The True Meaning of the Gold Rally

A paradox has emerged in the crypto market: Amid global inflation, geopolitical tensions, and interest rate uncertainty, Bitcoin, considered an absolute store of value, has seen a 15% year-on-year decline, compared to gold’s gains of more than 80%. This performance gap has called into question one of Bitcoin’s most fundamental narratives: Can it hedge against inflation as digital gold?

CoinDesk spoke with long-time Bitcoin supporters and asset managers to understand what he was saying in this question. Rather than a simple tale of failure, the answers that emerge present a more complex picture of the market’s underlying dynamics.

The Paradox in Price Performance: The Decoupling of BTC and Gold

In theory, inflation hedge assets should appreciate in value when the purchasing power of money decreases. For the complex of gold and other precious metals, this assumption worked. In 2025, the gold rally has reincarnated confidence in traditional inflation protection tools. However, the situation has been very different for Bitcoin.

With Bitcoin’s current price hovering at $85.37K, the year-over-year performance is negative by over 15%. This period marks a period in which Bitcoin proponents’ “absolute value” and safe haven theses are put to the real test. The questions are now enumerating: Why should anyone invest in Bitcoin when traditional assets offer better returns? The answers to this question lie in the internal dynamics of the market.

Abundance or Lack of Demand? Bitcoin Proponents’ Statement

In the words of Mark Connors, chief investment officer at Risk Dimensions, this is not a demand issue, but a matter of supply distribution. Institutional ETF inflows, while large-scale, do not push Bitcoin’s price upwards. Instead, these money flows absorb the decade’s supply – assets released by early adopters.

This statement supports Bitwise’s CIO, Andre Dragosch’s “muscle memory” thesis. According to Dragosch, the precious metals rally is a result of the tendency of investors to turn to assets they know and trust in times of uncertainty. Bitcoin is still perceived as a risky asset from this perspective. However, Dragosch stated that he is confident that Bitcoin will be in demand when traditional hard assets become extreme and capital begins to move towards more attractive valued options.

ByteTree’s CIO, Charlie Morris, suggests a deeper technological difference. He notes that gold enthusiasts and Bitcoin maximalists use the same narratives about limited supply, money printing, inflation, and chaos. However, according to Morris, gold is a reserve asset for the real world, while Bitcoin is a tool for the digital world. Since today’s problems are happening in the real world, Bitcoin hasn’t failed — it’s just pulled back in line with internet stocks.

Implications of Ownership Distribution and Institutional ETF Inflows

Peter Lane, CEO of Jacobi Asset Management, acknowledges that the “digital gold” narrative does not emerge when tested. In times of geopolitical stress and monetary uncertainty, Bitcoin has not acted as a true hedge against inflation or a safe haven. In 2025, gold and silver won overwhelmingly.

However, Lane predicts that it will see a delayed Bitcoin rotation. As things stand, investors are drawn to what they know and trust. There is a long-standing, widely embraced trust in precious metals. Bitcoin has yet to gain this level of trust. However, Jessy Gilger, senior advisor at Gannett Wealth Advisors, notes that the current gold rally is a temporary distraction. Institutions retreat to what they know in times of uncertainty, but historical standard deviation analyses suggest that Bitcoin will ultimately experience a reversion to the mean.

Corporate Expectations and Macro Environment Shifts

Anthony Pompliano, Chairman of ProCap Financial, mentions that Bitcoin has largely served as an inflation hedge over the past half-decade, but due to changing macro conditions. With impending deflation, Bitcoin needs to find other sources of demand to propel its presence upwards. Pompliano remains optimistic about Bitcoin’s future potential.

David Parkinson, CEO of Musquet, believes that the “digital gold has failed” narrative is a premature reaction. Bitcoin’s fixed supply and network growth continue to yield exceptional returns compared to gold in a multi-year perspective. According to Parkinson, Bitcoin is now emerging as the native monetary asset of the Internet. It is not a “protection” against inflation, but a permanent solution.

Breakouts at Technical Levels: XRP and Broader Market Dynamics

Bitcoin’s broader implications can be observed in high-beta tokens like XRP. XRP fell approximately 4% from $1.91 to $1.83 due to Bitcoin’s pullback. The decline accelerated when it broke below the critical support level around $1.87 with heavy volume.

From a technical perspective, traders now view $1.80 as a critical support level. When the price is permanently positioned above the $1.87–$1.90 range, it could be a sign of a corrective pullback. However, at the current price level, the market remains under the influence of risk-off selling.

Mean Reversion: Bitcoin’s Long-Term Value Potential

Andre Dragosch’s analysis is significant based on the relative Mayer multiple between Bitcoin and gold. Bitcoin has become comparable to the levels of the FTX collapse in 2022 compared to gold. It also points to Bitcoin’s significant undervaluation relative to the macro environment of 2026 and the level of global money supply.

These dynamics suggest the potential for an upward correction in terms of absolute value in the coming months. Bitcoin proponents argue that the current performance gap reflects a temporary market cycle rather than a permanent loss of demand. The fact that institutional money has not yet pushed the price upwards suggests that supply distribution is still ongoing and the potential for demand for bitcoin is pending. In this context, when traditional assets reach extreme levels, there is a possibility that capital will move to areas with higher absolute value potential.