Capital Withdraws from Crypto as Gold and S&P 500 Reach All-Time Highs

Bitcoin (BTC) slipped below recent support levels this week as gold and U.S. equities surged to new records, with on-chain metrics indicating a decline in liquidity within the cryptocurrency market.

The ongoing situation has reignited discussions on whether investors are exiting digital assets entirely or merely pausing amid shifting risk appetites.

Stablecoin Outflows and Weak BTC Signals Add Pressure

At the time of writing, Bitcoin was trading just under $88,000. This price action followed a broader trend, reflecting a risk-off mentality in global markets. Analysts are observing indications of institutional selling. Analyst Sunny Mom highlighted that the Coinbase Premium Index fell to around -0.17%, an indicator of heavier selling during U.S. trading hours compared to other times. This index had only been positive twice in January, suggesting a reduction in added positions by large investors.

Recent data has exacerbated these concerns, with Sunny Mom noting stablecoin market capitalization declining by $2.2 billion in recent days and extending a peak-to-trough fall of nearly $5.6 billion.

A different perspective from Darkfost indicated that Ethereum-based stablecoin supply dropped by about $7 billion in a week, marking the first contraction of this scale in the current economic cycle. Analysts usually interpret this decline as investors converting digital currencies back into fiat, thereby diminishing immediate buying power in the cryptocurrency markets.

In light of these developments, Sunny Mom presented a bearish outlook. Should selling pressures continue, Bitcoin might revisit key support levels, such as the True Mean Price around $81,000, the 2024 high near $70,000, or even the 200-week moving average close to $58,000. The current market flow suggests a downside risk, according to the analyst.

Recent market movements highlight this strain, with Bitcoin declining by 2.5% over the last week while gold climbed approximately 3% in a single day, breaking past $5,500 per ounce. This spike contributed around $1.65 trillion to gold’s market capitalization in a short period, rivaling the total valuation of Bitcoin.

Silver also surged above $120 per ounce, a 68% increase this month, reinforcing the narrative that capital is gravitating towards conventional safe havens.

Is Liquidity Departing Crypto or Waiting for Clarity?

The opinion on whether the cryptocurrency market is financing the rally in precious metals is mixed. On-chain analyst Carmelo Alemán noted that stablecoin supply ratio stands at 12.6, decreased from the 18-19 range seen weeks ago. This figure typically correlates with consolidation phases rather than outright exits, indicating that capital may be temporarily parked in stablecoins.

Market experts, including ETF analyst Eric Balchunas, caution against overreacting to short-term disparities. He pointed out that Bitcoin’s performance increased by over 400% since 2022, outperforming gold, silver, and the Nasdaq during this timeframe. He attributes the current slowdown to price anticipation running ahead of adoption linked with spot ETFs, rather than a systemic failure in the long-term narrative.

Moreover, some analysts emphasize that macroeconomic conditions are crucial in determining market behavior. According to Guga OnChain, the current dollar weakness associated with risk aversion typically favors assets with established roles, like gold, while Bitcoin behaves more like a risk asset. Until there’s a shift in these conditions, declining stablecoin supply combined with a cautious market stance may continue to exert pressure on cryptocurrency prices.