Gold, as one of the oldest and most trusted stores of value, has faced a brutal sell-off in just 24 hours, with its market value evaporating by trillions of dollars, surpassing the overall value of Bitcoin.
According to financial analysis publication The Kobeissi Letter, the gold market continued its significant adjustment from Tuesday, with a market value loss of $2.5 trillion on Wednesday.
This 8% drop puts gold on track to record its largest two-day decline since 2013, triggering panic among investors who had previously viewed it as a hedge against inflation and market volatility due to its 60% increase in early 2022.
Although Bitcoin (BTC) — often referred to as "digital gold" due to its supply cap — is known for more severe daily adjustments and double-digit percentage declines, the latest crash in gold highlights that even "safe-haven" assets are not immune to sharp sell-offs.
Such a scale of adjustment is extremely unusual, theoretically occurring "once every 240,000 trading days," Swiss resource investor Alexander Stahel noted in a post on the X platform on Tuesday.
"Gold has given us a lesson in statistics," he said, adding that the asset has faced larger drawdowns since 1971, with such adjustments occurring 21 times.
When discussing the reasons for the decline, Stahel pointed to the growing fear of missing out (FOMO), as "gold mania" momentum builds with more investors seeking exposure to gold stocks, physical bullion, and tokenized gold.
"FOMO led to the recent rise. Now, profit-taking and weak hands are being shaken out," Stahel said, adding that statistically, "the likelihood of calmer days ahead is high."
As gold's $2.5 trillion drop exceeded Bitcoin's overall market cap of $2.2 trillion, some commentators emphasized the scale of this adjustment compared to the cryptocurrency market.
"In terms of market cap, gold's drop today is equivalent to 55% of the value of all existing cryptocurrencies," trader Peter Brandt wrote in a post on X on Tuesday.
Bitcoin has long been criticized for its volatility, which is one of the key arguments against it as a legitimate store of value. According to Coinbase data, Bitcoin fell 5.2% from an intraday high of $114,000, though as of the time of writing, the daily decline was about 0.8%.
While Bitcoin spot exchange-traded funds (ETFs) recorded $142 million in inflows yesterday, the broader cryptocurrency market momentum has fallen into "extreme fear," with the cryptocurrency fear and greed index plummeting to levels not seen since December 2022.
The ongoing volatility in gold comes weeks after Deutsche Bank macro strategist Marion Laboure observed a series of similarities between gold and Bitcoin, which could make cryptocurrency assets an attractive store of value.
Deutsche Bank analysts also emphasized that despite a parabolic breakout to new highs in dollar terms, gold only surpassed its inflation-adjusted historical peak in early October.
Related: Australia's young people's biggest financial regret: Ignoring $400 in Bitcoin (BTC)
Original article: “Gold Faces Worst Drop in Years, $2.5 Trillion Market Value Wiped Out: How Does Bitcoin (BTC) Respond?”
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