Why Bitcoin, XRP, Solana, and Ether Slide as Gold and Silver Soar?

Major cryptocurrencies are facing persistent pressure this month, even as gold and silver rally.

These diverging trends reflect risks unique to digital assets, as mounting concerns over government stability propel precious metals higher, highlighting a strengthening investor confidence in traditional safe havens.

This month, bitcoin (BTC), the largest cryptocurrency by market value, has slipped over 9%, falling below the critical on-chain support level of $100,000, CoinDesk data show. This weakness has spread across the broader crypto market, pulling down major tokens like Ethereum’s ether (ETH), solana (SOL), and dogecoin (DOGE) by 11% to 20%. Payments-focused XRP has shown relative resilience, declining just over 7%.

The weak tone comes despite the dollar index (DXY) rally losing momentum after encountering resistance above 100 earlier this month. Typically, a fading DXY – which measures the U.S. dollar against a basket of global currencies – bodes well for bitcoin and the broader crypto market, as well as for precious metals.

However, while bitcoin remains subdued, precious metals have found strength; gold and silver have climbed 4% and 9%, respectively, this month. Less-tracked precious metals, such as palladium and platinum, have also seen gains exceeding 1%.

So, what’s holding bitcoin back? According to Greg Magadini, director of derivatives at Amberdata, much of the bullish news has already been priced in, leaving BTC vulnerable to bearish developments.

“Post government shutdown, risk assets are selling off as all the ‘good news’ catalysts are being used. Fed easing via FOMC, China/U.S. trade cooperation, and a now resolved government shutdown,” Magadini told CoinDesk.

“Bitcoin traders have been bullishly positioned given a strong fundamental backdrop for an EOY rally, but positioning is likely being flushed as the market was overly positioned long with no one to buy next,” he added.

Beyond positioning, fears of a deeper system risk are also weighing on cryptocurrencies, Magadini explained, highlighting a potential credit freeze as a major risk to digital asset treasuries (DATs).

These entities have been a significant source of bullish pressure for cryptocurrencies over the past year, relying heavily on credit markets to fund their crypto purchases, often through convertible bonds and debt issuance. However, DATs are not alone in this competition for capital; they face increasing pressure as sovereign governments and AI-related ventures vie for the same constrained pools of credit.

With the recent surge in DAT formation, demand for credit has increased substantially, Magadini noted, adding that should credit markets tighten or freeze, these companies could struggle to refinance their obligations, forcing them to sell their coin holdings to meet debt payments. This forced selling could trigger a cascade, as subsequent DATs might also be pressured to liquidate their assets.

“As crypto is sold, the next tranche of DATs could be forced to sell as well (so on and so forth). Although this risk is less pronounced with quality assets (such as BTC), the downward-spiral risk increases for DATs who recently purchased volatile altcoins at peak valuation,” Magadini said.

“Today the market is likely thinking about this type of credit risk,” he noted. (DATs are already facing the heat in the far east.)

Precious metals have gained ground mainly due to mounting concerns about the fiscal health of major economies, including the U.S.

Fiscal strain is evident in the soaring government debt-to-GDP ratios of many advanced economies. For instance, Japan’s ratio exceeds 220%, while the United States stands above 120%. France and Italy also carry substantial debt burdens, exceeding 110%. While China’s government debt-to-GDP is below 100%, its total non-financial debt exceeds 300% of GDP, making it one of the most indebted countries in the world.

The problem is particularly acute in the Eurozone, according to Robin Brooks, senior fellow in the Global Economy and Development program at the Brookings Institution.

“The precious metals rally isn’t about a flight out of USD. It’s a symptom of profoundly broken fiscal policy, which is true globally, especially in the Eurozone, where high-debt countries control the ECB,” Brooks said on X.

Interestingly, gold has a history of leading BTC price movements. Analysis by market experts indicates that BTC tends to lag behind gold by approximately 80 days, suggesting that once the yellow metal’s rally eventually stalls, the cryptocurrency may receive a strong bid.

Whether this pattern holds in the current macroeconomic environment remains to be seen.