Gold vs. Bitcoin: Why Tight Liquidity Supports Precious Metals Over Crypto

Gold (XAU) continues to show strength, while Bitcoin (BTC) has pulled back after reaching a record high in 2025. The decline reflects rising stress across financial markets. Liquidity is tightening, repo rates remain elevated, and capital is flowing out of U.S. assets.

Meanwhile, Bitcoin is attempting to rebound from the $80,000 support level but remains under pressure as financial conditions continue to deteriorate. This article examines how current macroeconomic trends are influencing the outlook for both gold and Bitcoin.

The Macro Driver Behind Gold’s Rise and Bitcoin’s Pullback

The Secure Overnight Financing Rate (SOFR) is testing 4.0%, showing stress in the $12 trillion repo market. This rate is trading above the Fed’s Interest on Reserve Balances (IORB), which signals a funding shortage. Commercial banks are being forced to fill the gap. This tight environment is draining liquidity across financial markets.

On the other hand, the St. Louis Fed Financial Stress Index is approaching zero, confirming rising systemic pressure.

At the same time, the Treasury General Account (TGA) remains elevated, limiting cash flow into the economy. A high TGA acts like a vacuum, pulling liquidity away from risk assets and slowing down credit flow. Financial conditions are now the tightest they have been in over a year.

Bitcoin Under Pressure as Liquidity Tightens

Bitcoin dropped from its record high in October 2025, reflecting tightening liquidity across global markets. Investors are pulling capital from speculative assets. The decline found support at a rising trend line that has been intact since 2023.

Bitcoin is now rebounding from the key $80,000 support area and looking for its next direction. A break below $80,000 would signal further downside, while a break above $105,000 would confirm renewed upside momentum.

The Fed may cut rates on December 10, but funding pressure remains elevated. At the same time, carry trade unwinds are triggering liquidations. The current macro environment remains unfavourable for short-term crypto strength.

Gold Breaks Out as Safe-Haven Demand Returns

The weekly chart for spot gold indicates that the price is trading within an ascending channel and has formed a bottom near the $4,000 area, located at the channel’s midline. The rebound from this midline signals renewed strength. This setup suggests that gold is likely to continue rising toward the upper resistance zone, around the $4,500 region.

Liquidity stress is boosting demand for safe-haven assets. Gold is responding to growing fear in the system. Its recent gains reinforce its role as a hedge against both inflation and systemic risk. If the Fed cuts rates while liquidity remains tight, gold will likely gain further traction.

Gold Outperforms Bitcoin as Institutions Seek Safety

Gold and Bitcoin prices are diverging in 2025. The chart below shows that both assets increased in value in 2024, but Bitcoin prices dropped sharply in 2025. However, gold remained the stronger asset with gains of over 50% this year. Bitcoin’s decline reflects its dependence on excess liquidity and leverage. On the other hand, institutions tend to prioritize safety as financial conditions tighten. Gold’s strength reflects real demand and its established role in central bank reserves.

Despite the sharp drop in 2025, Bitcoin’s overall price behaviour remains positive, as the upward trend from 2023 remains intact. This trend suggests that the recent decline is part of an intense volatility. The correction may attract renewed buying, which could push prices higher again.

The long-term outlook for the gold-to-Bitcoin ratio shows that it has reached resistance at the 0.05 level and is now correcting lower. This resistance coincides with Bitcoin finding support near the $80,000 level. The alignment suggests that Bitcoin may begin to recover from its current levels, with a potential rebound ahead.

Conclusion

Gold remains the stronger performer in a market weighed down by liquidity stress. The rising financial risk, combined with a firm technical setup, supports further upside. The metal continues to benefit from its role as a safe-haven asset, attracting steady institutional demand. If conditions remain tight, even with a possible Fed rate cut, gold will likely extend its advance toward the $4,500 level and beyond.

On the other hand, Bitcoin faces pressure due to its dependence on liquidity and leverage. The drop from record highs highlights that vulnerability. However, long-term support near $80,000 has held, and the broader uptrend from 2023 remains intact. A break above $105,000 will indicate further upside in the Bitcoin price.