Precious metals have surged past Bitcoin in yearly returns as traders position for potential Federal Reserve missteps ahead of the December 10 interest rate decision. Silver and gold delivered 86% and 60% returns, respectively, while Bitcoin has slipped into negative territory.
Bitcoin posted a negative 1.2% return according to Yahoo Finance data. Ryan McMillin, chief investment officer at Merkle Tree Capital, stated that a convergence of monetary debasement fears, macro uncertainty, and confused central bank signals has pushed precious metals higher.
Investors are actively positioning for a potential Fed policy error, McMillin noted. This scenario involves the central bank cutting rates while inflation remains above its 2% target.
The specific fear centers on sticky inflation risk, with key indicators like Core PCE trending back toward 3% annually. Services and housing sectors are showing particular strength in price increases, according to the analyst.
Asset Class Divergence
The defensive rotation into hard assets has created a stark three-way divergence between metals, equities, and cryptocurrencies. Traditional risk-on equities have rallied on their own merits, with the Nasdaq and S&P 500 up 21% and 16%, respectively, year-to-date.
McMillin explained that equities have ground higher through earnings growth, buybacks, and an AI-driven capital expenditure story. Bitcoin, meanwhile, is nursing the October liquidation shock and subsequent deleveraging, which ended its sustained uptrend following the ETF launch.
The S&P 500 is experiencing a late-cycle melt-up, while Bitcoin is undergoing mid-cycle repair, McMillin elaborated. On-chain data provides a nuanced picture of the cryptocurrency's current position.
On-Chain Data and Market Mean
Total supply in loss has ticked up, signaling capitulation among short-term holders. Experts previously told Decrypt that this represents a classic feature of mid-cycle resets rather than bear markets.
Bitcoin has dropped over 26% from its record high of $126,080 but has stabilized around the true market mean. This level represents the cost basis of all non-dormant coins excluding miners, according to Glassnode's Thursday report.
The true market mean serves as the dividing line between mild bearish phases and deeper bearish territory under general market theory. McMillin expects Bitcoin's disconnect from metals and U.S. equities to be temporary, forecasting that the dynamic will eventually follow global liquidity and equity markets higher once order books recover.
Bitcoin's high sensitivity to macro shocks will likely remain unless it reclaims the 0.85 quantile at roughly $106,200, Glassnode analysts wrote. The top cryptocurrency declined 1.3% over 24 hours and has been range-bound between $94,000 and $82,000 for over two weeks, showing continued volatility in the digital asset market.