Gold Outshines Bitcoin as Investors Hedge Against Fed Uncertainty

The primary driver behind the surge in gold (XAU) and silver (XAG) is a convergence of fears surrounding monetary debasement, broad macroeconomic uncertainty, and the potential for a Federal Reserve policy error. According to Ryan McMillin, chief investment officer at Merkle Tree Capital, investors are positioning defensively for a scenario where the Fed begins cutting interest rates while inflation remains stubbornly above its 2% target. This specific fear centers on the risk of “sticky” inflation, with key indicators like Core PCE—which measures changes in the prices of goods and services—trending back toward 3% annually, particularly within the services and housing sectors.

The data underscores this flight to safety. While Bitcoin has struggled, the returns for precious metals have been eye-watering, as reported by Trading Economics. This performance gap is not merely a short-term blip but reflects a deeper sentiment shift. Traders are explicitly hedging against the outcome of the Fed’s upcoming December 10 interest rate decision and the broader risk that central bank actions could inadvertently reignite inflationary pressures or destabilize markets.

The defensive rotation has created a clear three-way split in market performance. On one side, safe-haven metals are soaring. On another, traditional risk-on equities like those in the S&P 500 (SPX) and Nasdaq (NDX) have rallied on their own merits, up 16% and 21% year-to-date, respectively. McMillin describes this equity advance as a “late-cycle melt-up,” driven by conventional pillars like earnings growth, share buybacks, and a compelling narrative around AI-driven capital expenditure.

Bitcoin (BTC), however, occupies a distinct and lagging third position. The top cryptocurrency is described as being in a phase of “mid-cycle repair,” nursing the shock of a major liquidation event on October 10 and the subsequent market de-leveraging. This event effectively ended the sustained uptrend Bitcoin enjoyed following the launch of spot ETFs in the United States. The result is a temporary disconnect where U.S. equities and precious metals advance while Bitcoin consolidates, though McMillin expects this divergence to be temporary, forecasting Bitcoin will eventually follow global liquidity and equity markets higher once its order books recover.

On-chain analytics provide a nuanced view of Bitcoin’s current state. Data from Glassnode indicates that Bitcoin has stabilized around a critical metric known as the “true market mean”—the cost basis of all non-dormant coins, excluding miners. In general market theory, this level acts as the dividing line between a mild bearish correction and a descent into deeper bear market territory. Stabilization here, following a more than 26% drop from its $126,080 all-time high, suggests the market is undergoing a reset rather than entering a prolonged downturn.

Further supporting the “mid-cycle” thesis is the behavior of short-term holders. The total supply of Bitcoin in loss has ticked upward, signaling a phase of capitulation among this cohort—a classic feature of a market reset. However, vulnerability remains. Glassnode analysts note that Bitcoin’s high sensitivity to macroeconomic shocks is likely to persist unless it can reclaim the 0.85 quantile, a price level roughly equivalent to $106,200. Until then, as evidenced by its recent trading range between $82,000 and $94,000 over the past two weeks, the cryptocurrency remains in a fragile equilibrium, caught between repair and the persistent pull of macro uncertainty.