Bitcoin's Weaknesses and Advantages Over Gold: An Analysis of Why Precious Metals Rally Continues to Prevail

As the world faces geopolitical uncertainty and ongoing inflationary pressures, the behavior of crypto assets is creating a question mark for its supporters. In the context of the weaknesses and advantages of these two store-of-value instruments, Bitcoin [BTC$84.61K] (/en/price/bitcoin) is performing far behind gold, even though traditional economic theory states that both should play a similar role as inflation hedges.

Bitcoin’s Weaknesses in Inflation Hedging—Questions That Troubleshoot Supporters

Market data shows a striking contrast. During periods of economic uncertainty and geopolitical escalation in recent years, gold has surged by more than 80%, while Bitcoin has seen a decline of around 16.50% in the past year. This divergence creates a fundamental question: why would anyone still believe in Bitcoin as a long-term hedge when precious metals and even tech stocks provide more attractive returns?

This fact forces analysts to question whether Bitcoin has really failed in its mission or whether this short-term weakness actually reflects something more complex in market dynamics. Industry experts explain that this is not about Bitcoin’s fundamental failure, but rather about how the market reacts to the rapidly shifting macro environment.

Investors’ Oversupply and ‘Muscle Memory’—The Explanation Behind BTC’s Lagging

Bitcoin proponents have put forward several hypotheses as to why the relative weakness of the digital asset does not reflect the weakness of the system itself. First, they point to the concept of investor “muscle memory”—a psychological phenomenon in which institutional investors return to an asset they are already familiar with in the face of uncertainty. In times of crisis, precious metals are the default choice because of their centuries-long historical heritage as a store of value.

Second, there is a structural element that is often overlooked: Bitcoin is currently undergoing a period of massive ownership transfers. The massive inflow of institutional ETF funds does not move prices upwards because they simply absorb the supply that early adopters have sold over the past decade. This means that Bitcoin’s technical advantage—a protocol that has proven stable for more than 15 years—has not translated into price momentum due to the market supply dynamics that are still in a consolidation phase.

Some analysts from leading asset management firms believe that when investors realize that digital scarcity is more efficient than physical inheritance, capital rotation will occur. At that point, Bitcoin is expected to “catch up” against gold in a longer cycle.

The ‘Digital Gold’ Narrative and Capital Rotation: How Long Will Bitcoin Have to Wait?

Interestingly, Bitcoin maximalists and gold enthusiasts use almost identical narratives: limited supply, excessive money printing, inflation, and geopolitical uncertainty. The difference lies in their confidence in which asset is better suited to the current context.

Bitcoin proponents maintain that “digital gold” is the answer to the ever-evolving digital world, while gold serves the traditional physical economy. The problem is, in 2025-2026, the most pressing uncertainty will be in the physical economy—war, inflation, and interest rate uncertainty. That’s why gold is dominating. However, the long-term outlook remains optimistic: once traditional hard assets reach very high valuations, capital is projected to turn to Bitcoin, which is currently still “under-priced” relative to the macro environment.

Several technical metrics support this argument. Based on the Mayer multiple—the relative comparison between Bitcoin and gold—the major crypto asset is currently at its lowest valuation level since the 2022 crash, a condition that has historically been a strong buy signal for long-term investors.

New Demand for Bitcoin in a Potential Deflationary Era

While Bitcoin has served as an inflation hedge for the past half-decade, professionals in the industry are starting to see a new problem: the possibility of deflation on the economic horizon. In this scenario, Bitcoin requires a different demand narrative to remain relevant as an investment instrument.

However, optimism remains strong in the Bitcoin community. Some experts believe that Bitcoin is not just a “hedge” against inflation, but a “permanent solution”—a native monetary system for the internet that is independent of central bank policy. In this view, the ever-evolving technology and adoption of networks will deliver returns that far exceed inflation over a multi-year timeframe, regardless of whether there is deflation or inflation.

Latest Data: Bitcoin and XRP in Market Pressure

The current crisis market situation is also touching altcoins. XRP is down about 5.41% in the last seven days, moving from $1.91 to $1.82 as Bitcoin’s decline triggered a widespread risky sell-off across the crypto sector. The decline accelerated after XRP broke below the key support level at $1.87 with high volume, erasing the previous week’s gains before buyers broke into the $1.78–$1.80 zone.

Traders now view $1.80 as a crucial support level. To signal a corrective pullback rather than the start of a deeper decline, a sustained move back above the $1.87–$1.90 range is urgently needed. These dynamics reflect the reality that during market uncertainty, capital flows continue to flow into assets that are seen as traditional hedges.

Conclusion: Current Weaknesses vs. Long-Term Advantages

Bitcoin’s weaknesses and advantages in the current market context reflect a larger phase of transition. The world’s first crypto asset shows short-term weakness in competing with gold as an instant inflation hedge, but its advantages in terms of technology, digital scarcity, and potential as an internet-native monetary asset remain intakable.

The question that will define the next decade is: when will investors realize that the rotation from gold to Bitcoin is a move that is not only financially profitable, but also strategic in securing value in the digital age?