Diverging flows amid dollar weakness…virtual assets down, gold and silver strong

Cryptocurrencies and the gold and silver markets are showing opposite trends.

On the 13th (local time), CoinDesk reported that while the recent rally in the dollar index (DXY) has stalled, major crypto asset prices including Bitcoin (BTC) have fallen sharply, whereas gold and silver prices have continued to rise.

Bitcoin has fallen more than 9% this month and slipped below $100,000. Major altcoins such as Ethereum (ETH), Solana (SOL), and Dogecoin (DOGE) also corrected by 11% to 20%. XRP fared relatively better, falling only in the 7% range.

This is an unusual trend in a phase where dollar strength is easing. Typically, when the dollar index’s momentum weakens, a favorable environment is created for alternative investment assets such as Bitcoin and precious metals. But this time only gold and silver rose by 4% and 9%, respectively, highlighting a preference for "traditional safe-haven assets."

The main reason cited for Bitcoin’s weakness is credit market risk. Greg Magadini, head of derivatives at Amberdata, said, "Positive developments such as the end of a government shutdown, expectations of rate cuts, and U.S.-China cooperation have already been priced into the market," adding, "Buy positions expecting a year-end rally had built up excessively, and there is a lack of new buying to absorb them, which is deepening the correction."

He pointed to credit risk at digital asset treasury (DAT) firms as a key variable. DATs have been buying crypto assets with funds raised through convertible bonds, corporate bond issuances, and the like, and they were a major source of demand that drove the market higher over the past year. However, competition for funding alongside AI investment and government borrowing has increased pressure on the credit market.

Magadini said, "The rapid increase in DAT establishments has led to an excessive rise in credit demand," and warned, "If the credit market tightens, DATs could struggle to refinance and may have to sell held coins to repay debt."

He added, "If coin selling begins, lower-tier DATs could also sell in succession, creating a downward spiral," noting, "The risk to high-quality assets like Bitcoin is relatively low, but DATs that bought overvalued altcoins face much greater risk."