Four reasons Bitcoin is failing to copy all-time highs for gold and stocks
News Summary
New research indicates that Bitcoin and other cryptocurrencies are failing to replicate the all-time highs seen in gold and U.S. stock markets. Onchain analytics platform CryptoQuant's XWIN Research Japan identifies four key reasons: Fed rate cuts, stablecoin reserves, leveraged trader behavior, and historical market patterns. The report suggests that in the early phases of Fed rate cuts, institutional capital tends to flow first into high-liquidity assets such as equities and gold. Cryptocurrencies, especially altcoins, are positioned at the “end of the liquidity pipeline,” only benefiting when risk appetite broadens. Current market conditions mirror 2024, with an initial rally after rate cuts followed by a correction as liquidity failed to fully rotate into crypto. Historically, Bitcoin tends to outperform only after traditional assets cool, with data showing an average gain of +12% in 30 days and +35% in 90 days following equity all-time highs.
Background
It is currently 2025, and Donald J. Trump has been re-elected as the U.S. President, with his administration's economic policies likely having a sustained impact on global markets. During this period, the Federal Reserve has initiated a rate-cutting cycle, which typically stimulates market liquidity and influences the performance of various asset classes. Against this backdrop, both gold and U.S. stock markets have repeatedly posted new all-time highs, signaling robust performance in traditional assets. However, Bitcoin and the broader cryptocurrency market have failed to keep pace, prompting discussions about their status as a mainstream asset class and their correlation with traditional markets.
In-Depth AI Insights
What are the deeper investment implications of crypto's status as the "end of the liquidity pipeline" during a Fed rate-cutting cycle? - This suggests that cryptocurrencies remain highly speculative, high-beta assets, benefiting only after traditional markets have fully absorbed initial liquidity. It is not yet a primary destination for institutional "smart money" following Fed easing. - This challenges its narrative as a truly diversified, mainstream asset class, instead positioning it as a late-cycle beneficiary. Investors should be wary of its vulnerability when liquidity preferences shift. How might the observed stablecoin dynamics influence the broader crypto market's short-to-medium term trajectory, particularly considering the "lag, then leap" historical pattern? - The withdrawal of stablecoins from exchanges indicates a risk-off or profit-taking mentality among traders, rather than active deployment to buy Bitcoin or Ethereum. This could signal a period of consolidation or further downside in the short term. - Given the "lag, then leap" historical pattern, this outflow might be a necessary "cooling" phase after traditional assets peak, setting the stage for subsequent crypto accumulation and breakout. Institutional players might be parking liquidity off-exchange, awaiting clearer signals. Under a Trump administration-led economic environment, can the "lag, then leap" pattern for crypto continue, or will it face new challenges? - Trump administration policies often favor deregulation and economic stimulus, which theoretically supports risk assets. However, if policies lead to increased dollar volatility or significantly higher inflation expectations, it could alter liquidity flows and even stablecoin appeal. - The sustainability of this "lag, then leap" pattern hinges on institutional acceptance of crypto as an inflation hedge or store of value, and its deeper integration with traditional finance. Regulatory uncertainty remains a key variable, potentially extending the "lag" period or dampening the "leap."