How a decline in gold and silver is impacting bitcoin

Bitcoin has often been associated with precious metals as a safeguard against a weakening dollar. This trend is reversing amid a hawkish Federal Reserve, causing bitcoin to decrease alongside the metals it was meant to compete with.

— A widespread reversal of the so-called debasement trade is affecting gold, silver, and bitcoin simultaneously, as investors move away from scarce assets that were previously viewed as shields against currency depreciation.

— A newly assertive Federal Reserve under Chair Kevin Warsh and a stronger dollar are elevating real yields, rendering non-yielding assets such as gold, silver, and bitcoin less appealing and more costly for international buyers.

— Bitcoin, which previously trailed metals during their ascent, is now closely mirroring their downturn, having fallen approximately 50 percent from its peak, even as it has recently outshined gold and silver relatively, highlighting its dual role as both a speculative asset and a hard-money safeguard.

The current artificial intelligence stock boom has attracted capital from various sectors, from traditional metals regarded as the safest assets to crypto, deemed the riskiest.

Gold fell below $4,000 for the first time since November earlier this week, silver has plummeted more than half its value from its peak, and bitcoin has dipped to nearly $58,000.

These three selloffs are not mere coincidence. For much of the last two years, they have largely represented the same trade, and now the same dynamics are unwinding it.

This trade is referred to as the «debasement» trade. It is the belief that extensive government spending and escalating national debt will gradually diminish the value of fiat currency, prompting investors to seek out scarce assets that no government can reproduce.

What unites them on the way up also unites them on the way down. The new Federal Reserve chair, Kevin Warsh, adopted a hawkish stance at his inaugural meeting, and markets are currently anticipating two quarter-point rate hikes by March 2027, which would elevate the Fed’s benchmark rate to between 4.00% and 4.25%. The U.S. dollar has risen by 0.8% this week alone.

Both of these factors work directly against hard assets. Increased rates elevate real yields, the returns on safe assets like Treasuries after inflation, which raises the expense of holding gold, silver, or bitcoin, all of which yield no return.

A stronger dollar makes all three assets pricier for buyers using alternative currencies. Therefore, when gold and silver decline, it typically indicates that the macroeconomic environment has shifted against this narrative.

Bitcoin’s position in the asset basket has always been somewhat awkward. Throughout much of 2025, while gold and silver saw substantial rallies, bitcoin remained stagnant near $100,000. This divergence raised questions about whether it still fit within the debasement trade or if its function as a hedge against currency devaluation had diminished.

However, a rather unsettling development is that bitcoin lagged behind the metals during their ascent but is now closely following them downwards.

The scale of this reversal is significant. Gold is down approximately 28% from its January 2025 peak near $5,600, silver has dropped more than 50% from its high near $120, and bitcoin has decreased by roughly 50% from its October summit. This downturn has pushed bitcoin below its 200-week moving average, the average price over the last four years and a closely monitored long-term support level, at about $60,000.

Nevertheless, there is a silver lining for bitcoin holders, albeit with a caveat.

Since these ratios hit their lows in February, bitcoin has actually outperformed both metals, gaining around 30% against gold and more than 55% against silver.

Bitcoin operates as two entities simultaneously: a speculative risk asset and a hard-money hedge, and currently, both perspectives align. The debasement trade served as the bullish argument that propelled it alongside gold and silver, but its unwinding represents the bearish argument that is dragging it back down with them.

As long as the Federal Reserve maintains its hawkish stance and the dollar remains strong, bitcoin is likely to struggle to separate itself from the metals it has been compared to for years.