Gold, one of the oldest and most trusted stores of value, suffered a brutal collapse in just 24 hours, wiping out trillions of dollars in market value, more than the entire value of Bitcoin.
The gold market extended Tuesday’s massive correction, with $2.5 trillion wiped from its market capitalization on Wednesday, according to financial analysis publication The Covisi Letter.
Gold prices suffered their biggest two-day decline since 2013, and the 8% drop sparked panic among investors who had turned to gold as a hedge against inflation and market volatility after soaring 60% in early 2022.
Bitcoin (BTC), often referred to as “digital gold” due to its limited supply, is known for its large corrections with daily declines in the double digits, but gold’s latest sell-off highlights that even “safe haven” assets are not immune to sharp declines.
Gold’s 7% drop is unusual: Here’s why it crashed
The scale of the correction is so unusual that it could theoretically only happen “once every 240,000 trading days,” Swiss resources investor Alexander Stahel said in a post on X on Tuesday.
“Gold is teaching us a statistical lesson,” he said, adding that the asset has faced even bigger declines since 1971, with 21 such corrections.
Stahel pointed to the reason behind the decline as fear of missing out (FOMO) as investors seek exposure to gold equities, physical gold bars and tokenized gold amid a growing ‘gold mania’.
“FOMO was responsible for the recent market rally. Now the profit-taking and weak hands have been shaken off,” Stahel said, adding that statistically there could be “calmer days ahead.”
Crypto Fear and Greed Index hits lowest level since 2022
With gold’s $2.5 trillion decline outpacing Bitcoin’s overall market cap of $2.2 trillion, some commentators highlighted the magnitude of the correction compared to the crypto market.
“In terms of market capitalization, today’s drop in gold is equivalent to 55% of the value of all cryptocurrencies in existence,” veteran trader Peter Brandt wrote in an X post on Tuesday.
Bitcoin, whose volatility has long been criticized as one of the key arguments against a legitimate store of value, also fell 5.2% from the day’s high of $114,000, with daily losses of around 0.8% at the time of writing, according to Coinbase data.
Bitcoin spot exchange-traded funds (ETFs) also saw inflows of $142 million yesterday, but overall crypto market momentum has plunged into “extreme fear”, with the Crypto Fear & Greed Index plummeting to levels not seen since December 2022.
Related: Bitcoin-Gold Correlation Increases as BTC Follows Gold’s Path to Store of Value
Gold’s continued volatility comes weeks after Deutsche Bank macro strategist Marion Labour said there were a series of similarities between gold and Bitcoin that could make the crypto asset an attractive store of value.
Deutsche Bank analysts also highlighted that despite the parabolic new highs in dollar terms, gold only surpassed its real-adjusted all-time high in early October.
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