The Truth About The Gold-Bitcoin Rotation

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My name is Guy and if you're seeking unbiased in-depth information about Bitcoin,

cryptocurrencies, Web3 and all manner of related topics,

then you've come to the right place. I hope you enjoy today's episode.

It's believed that Bitcoin lags gold by around three months.

If this is indeed the case, then gold's massive rally at the end of 2025

should translate to a massive rally for Bitcoin at the beginning of 2026.

However, this assumes that there's rotation between Bitcoin and gold

since Bitcoin is seen as digital gold by investors.

The truth though is that the relationship between Bitcoin and gold is much more complex.

That's why today we're going to do a deep dive into the dynamics between Bitcoin and gold

to figure out what it means for the price of both assets in the coming months.

This is a video you can't afford to miss.

Before we begin, you need to know that nothing in this video is financial or investment advice.

It's educational content intended to inform you about the nuanced relationship

between Bitcoin and gold. If you want to see more of this kind of content in your feed,

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Now, let's start with a surface level analysis of Bitcoin and gold,

and then we'll go down the rabbit hole. In theory, investors see Bitcoin,

specifically the BTC coin, as a safe haven like gold, hence why there's a relationship between the two.

That's because, just like gold, BTC has a fixed supply, can be self-custodied,

is not controlled by any individual or group of individuals or institutions, and so on.

In practice, most investors still see BTC as a risk asset,

specifically as a higher risk, higher reward bet on tech stocks,

particularly tech indices like the NASDAQ.

Notably, this is technically true for investors who see BTC as digital gold too,

because most of them also see BTC as a higher risk, higher reward bet on gold.

This makes BTC more like digital silver than digital gold,

and you'll see why that's significant later.

Anyways, the fact that BTC is seen as a risk asset by most investors,

and even treated as a de facto risk asset by investors who see it as digital gold,

means that BTC lies on the opposite end of the risk spectrum from gold.

Gold is a true safe haven.

This is because of the characteristics I mentioned a few moments ago,

and because gold has historically been seen as a store of value

by everyone everywhere for, well, millennia.

With this in mind, the apparent lag between Bitcoin and gold starts to make sense,

and it becomes apparent that the rotation has nothing to do with the

gold digital gold relationship.

It instead has everything to do with risk.

When gold is rising, it's typically a sign that investors are concerned

about what's going on in the markets and the economy.

In this risk off environment, risky assets like BTC tend to perform poorly.

When gold is falling, it's typically a sign that investors are feeling confident

about what's going on in the markets and the economy.

This creates a risk on environment which will cause risky assets like BTC to ride,

especially if there are significant catalysts that bring attention and investment

to the crypto market.

The result is something that looks like a lagged rotation between BTC and gold,

and it technically is.

But again, this lagged rotation has less to do with the relationship between BTC and gold,

and more to do with the risk off or risk on environment in the background.

Case in point, when the pandemic started in 2020, gold's price rallied while BTC crashed due

to the risk off environment.

By the summer of 2020, however, unprecedented stimulus by central banks and governments

gave rise to a risk on environment.

The result was that gold's price fell in the autumn of 2020,

and this corresponded to a massive rally in crypto,

with many altcoins hitting their cycle tops in the spring of 2021 just as gold was bottoming.

Once again, this makes perfect sense.

The initial rising gold signaled a risk off environment wherein crypto crashed,

and the subsequent falling gold signaled a risk on environment wherein crypto rallied while gold fell.

If you need more evidence, look no further than the autumn of 2024,

when gold fell while aggregate measures of altcoins like others hit multi-year highs.

The fact that gold's price continued rallying after that could be the reason why altcoins

continued falling after that.

It wasn't because gold was draining liquidity from altcoins.

It was because gold was signaling a risk off environment wherein crypto struggles.

So this begs the question of what will happen to crypto when gold's most recent rally ends,

and gold prices start to fall.

At first glance, you might think it will be a crypto rally.

Upon closer inspection, however,

you realize that gold's price rallied when crypto topped in late 2021,

and it rallied when crypto topped in early 2018.

So this suggests that there's more to this risk rotation that meets the eye,

and that's because there is.

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Right, to quickly recap, BTC is seen as a risk asset by most investors,

and even investors who see it as digital gold treated as a higher risk, higher reward version

of gold, i.e. also as a risk asset. Conversely, gold is seen as a safe haven by most investors.

So, it makes sense that crypto falls when gold rallies and the gold falls when crypto rallies.

It's what happens when capital moves from risk off to risk on, respectively.

The caveat is what I mentioned earlier, and that's that we've seen periods where gold and crypto

would rally together, namely when the crypto market topped in early 2018 and late 2021.

We've also seen periods where gold and crypto would crash together,

namely when crypto bottomed in late 2018 and in late 2022.

This change in correlation has to do with the change in gold's demand drivers over its cycle.

As most of you will know, central banks have been increasing their allocations to gold since

some reserves of Russia's central bank were frozen following the invasion of Ukraine in 2022.

This freezing center signal that western assets used as reserves were no longer safe to hold

as reserves in size, particularly government bonds. Since gold was previously used as reserves,

it's the logical alternative to accumulate. At the same time, many investors around the world

have been accumulating gold too. In China's case, the collapse of the housing market, which was

previously the safe haven for most investors, has resulted in investors there looking for alternatives.

Precious metals are once again the most logical alternative, as they aren't as affected by

Chinese Communist Party policies. For context, China's housing boom and bust was caused by

Communist Party policy. In the case of western countries like the US, many investors there have also

been hesitant to allocate to bonds due to excessive government spending and political risks,

and they've been hesitant to allocate to stocks because of the concentration and bubble risks.

This has likewise resulted in allocations into gold. The catch is that the buying

pressure of central banks and these investors pushed gold prices up a lot, and the result was that

gold started to attract speculative investors, both from stocks and crypto. And this is where things

get interesting. We can get a sense of how much of gold's price action has been driven by speculation

by looking at search trends for terms like gold and gold price. As expected, trends for these

search terms started going vertical in the summer of 2025 when gold started breaking out again.

Put simply, it looks like gold's rally from around $2200 at the start of 2024 to $3400 in

the summer of 2025 was driven primarily by fundamentals, accumulation by central banks and risk

off investors. However, the rally from $3400 to the recent high of $4600 was driven primarily by

speculation. Additional evidence of this can be seen in the fact that higher risk, higher reward

bets on gold rallied during this period. And these include gold miners and silver, both of which

have been ripping since the summer of 2025. When such high beta plays are also going parabolic,

you know that speculation in precious metals is rising fast. In other words,

risk on investors are piling capital into gold, silver and other precious metals.

When speculation becomes the dominant driver, the correlation between gold and crypto becomes

positive. And that is basically why there were periods where crypto was inversely correlated to

gold and periods where it was positively correlated to gold. When it was primarily risk off investors

allocating to gold, its price would rise and crypto prices would fall. But when it was

primarily risk on investors allocating to gold, its price would rise and crypto prices would also rise.

I'll explain why they haven't a little later. First though, I need to underscore the fact that

speculative flows currently dominate gold and precious metals more broadly. In our view,

the biggest giveaway that speculative flows are in control is the fact that many YouTubers who

often talk about gold are promoting services that offer yield on gold paid in gold. The fact that

even respected YouTubers are promoting these services now suggests there's lots of revenue there.

Anyone who's been in crypto for more than a few years will know that when yield starts getting

offered like this, it means both speculation and leverage are rising fast. And when this speculation

runs out and the leverage unwinds, gold's price could fall sharply. As I just explained, this fall

would be due to four sales from risk on investors. And it could correspond to another leg

lower in the crypto market, not rotation. Now, to quickly recap, crypto prices tend to rise when

gold prices fall and gold prices tend to fall when crypto prices rise. However, this inverse

correlation can become positive when risk on speculative capital starts to become the primary

demand driver for gold. This is arguably what we've seen since the summer of 2025, and this suggests

that a crash in gold could be bearish for crypto, not bullish for crypto. And this is where the rabbit

hole goes really deep, because everything I just mentioned is ultimately driven by the liquidity

cycle. To bring you up to speed, liquidity is a fancy word for money in the economy and the

markets. Michael Howell is the leading expert in global liquidity, and he's been predicting that

liquidity will peak in late 2025 or in early 2026. Now, many interpreted this as bullish for risk

on assets like crypto. The thing is that the most bullish phase of the liquidity cycle for risk on

assets is when liquidity is rising, not when it's peaking, as you can see in this image here.

If you look closely, you'll notice that the peak of the liquidity cycle corresponds to rallies

and cycle tops for commodities, which includes precious metals. In case you missed it, other commodities

like copper and coffee have been rallying in recent months too. This is consistent with Howell's

forecast that liquidity would peak around this time and consistent with his asset allocation

framework, which notes that commodities rally the most when liquidity peaks. In case you didn't

notice what follows the liquidity peak is a liquidity drawdown, which is bearish for all assets.

That's because there's a scramble for cash. Hence why cash is the asset to hold at that phase.

What's fascinating is that Howell believes that the global liquidity cycle is driven by the

debt refinancing cycle. In short, individuals and institutions around the world need to roll over

their debts every four to five years. This rolling over of debt causes liquidity to fall in the same

way that paying off your entire credit card balance means that you have less money left to spend

on other things. Imagine that, but on a global scale. Now consider that the world's wealthiest

individuals and institutions keep as much money in assets as they possibly can, be they stocks,

crypto or precious metals. When it's time to refinance their debts, they must sell these assets

for cash, which is again why Howell's framework suggests holding cash during a liquidity contraction.

And in case it wasn't clear enough, liquidity is expected to contract in 2026. This is just because

there's a huge debt refinancing wall in 2026. This begs a bigger question then of how to tell

when that wall is starting to drain liquidity from the markets. The short answer is to look at the

DXY, which measures the strength of the US dollar against a basket of other currencies. If the DXY

is rising, the demand for cash is increasing and assets are likely to fall in price.

If the DXY keeps falling, assets will keep rising. As some of you will know, there's a strong

inverse correlation between gold and the DXY. When the DXY rises, gold tends to fall. And as we've

just learned, there is a lot of speculation and leverage in the gold market. So when the DXY

eventually rises as debts are refinanced sometime in 2026, gold's price will likely fall, causing

speculative capital to flee and triggering liquidations, pushing prices down even more. Meanwhile,

crypto prices are also likely to fall, not because gold is falling, but because the liquidity drain

caused by debt refinancing is creating a risk off environment that's pushing down gold's price

due to risk on investors getting out of gold. Once again, this highlights the fact that it's not

gold, which drives crypto prices. It's the risk off or risk on environment that gold's price is

signaling based on its demand drivers. When most of the demand for gold is coming from risk off

investors, gold's price will rise while crypto falls. But when most of the demand is coming from

risk on investors, as is the case now, gold's price will fall while crypto's price falls as well.

I'll quickly note that the debatement trade narrative is yet more evidence that speculative

flows are in command of the price of gold and precious metals at this stage. The silver lining

is that even though the price of everything will fall when liquidity contracts, gold's price

should fall less than other assets in percentage terms as risk off investors increase their

allocation to gold during the drawdown. The golden lining, pun very much intended, is that every

liquidity drain due to debt refinancing results in a liquidity injection to help with this debt

refinancing, which then restarts the cycle. Now, to quickly recap, the reason why speculative

capital has been the primary demand driver for gold recently is because this is what happens at the

end of every liquidity cycle. When liquidity peaks, commodities rally. What comes next is a liquidity

contraction that causes asset prices to fall. The golden lining, though, is that the liquidity

contraction will result in a liquidity injection, which will cause asset prices to rise. So this

just leaves two questions on answered. The first is why crypto didn't rally alongside gold in

late 2025, as it did in previous cycles. And the second is what comes next for the crypto market,

given everything we've just discussed. The answer to the first question is something that not

enough people are talking about. And that's that there was a disconnect between crypto and liquidity

sometime in the summer of 2025. For those unfamiliar, crypto is highly correlated to global

liquidity and prices lag liquidity by around three months. As you can see, global liquidity kept rising

into the autumn of 2025, but BTC and the rest of the crypto market chopped sideways. Literally every

other major asset class hit new all-time highs, except crypto. US stocks, foreign stocks, precious

metals, other commodities, the list goes on. Now, many have claimed that this disconnect between

crypto and global liquidity was caused by the refill of the treasury general account over the summer.

But this doesn't make sense, because the disconnect between crypto and global liquidity began weeks

before the TGA started being refilled. And not only that, but the three-month lag means that the

cause of the disconnect likely happened in the spring of 2025. Now, our best guess is that something

in the crypto market broke in the spring of 2025 when the markets crashed in response to Trump's

Liberation Day tariffs. Again, many have claimed that the breakage happened with the 10th of October

liquidations. But the reason why those liquidations were so brutal was precisely because liquidity

in the crypto market was already abnormally low heading into the event. This pertains to the answer

to the second question, which you'll recall is what comes next for the crypto market, given that

the next drawdown in gold may not result in a rotation into crypto. The answer is a bit complicated.

You see, as illuminating as the liquidity models from Michael Howell and others are, they don't

factor in injections of liquidity, which were unexpected. Like, for instance, last minute stimulus.

As most of you will know, the Fed started buying US bonds at the start of December 2025,

which it insists is not quantitative easing. Despite what the Fed insists, though, this

does amount to a liquidity injection and the drawdown of the Treasury General account since November

is another tailwind for liquidity. When you remember that crypto lags liquidity by three months,

you understand there could be a small rally sometime in Q1, 2026. And when you combine this

increase in liquidity with the potential approval of the Clarity Act, it means that attention and

capital could rotate into the crypto market. The approval of the Genius Act in 2025 was essentially

the only bullish crypto catalyst that caused prices to rise. With a bit of luck, we'll see history

repeat with the Clarity Act having a positive effect on crypto prices. After that small rally,

though, the crypto market is likely to fall as liquidity is drained due to the debt refinancing

wall, which I'll remind you can be tracked by looking at what the DXY is doing. The more the DXY

rises, the closer we're getting to that debt refinancing wall and the subsequent liquidity drain.

And I'll repeat that this liquidity drain will eventually be followed by a liquidity injection

to help with the refinancing. The only problem is that this liquidity injection probably won't

happen until the markets or the economy deteriorate to the point that policymakers start to panic.

That's exactly why things like QE have historically corresponded to market crashes and bottoms

rather than rallies or tops. The Fed only steps in with extensive stimulus when things look

very bad. So be sure to keep that in mind in 2026. And yes, once that emergency stimulus is

announced, expect to see crypto prices start to recover around three months later. And yes,

gold will probably bottom around the same time the crypto will just like it did in 2018 and 2022.

Then the liquidity cycle will start over again with stocks and crypto leading the way as liquidity

expands and a rally in commodities marking the peak in liquidity just like it seems to be now.

The wheel keeps on turning. And if you want to know which cryptos could do well once the next liquidity

cycle does begin, then be sure to check out our video about the top crypto trends for 2026 using the

link here. If you made it this far, thank you so much for watching and I'll see you in the next one.

This is Guy signing off.

Hello, Guy again. Before you go, if you have a moment, please do rate and review us.

It really helps the podcast grow and find new listeners.

Okay, that's all for this episode. Thank you for listening and see you again soon.