Why virtual currency can't beat the demand for cash: Structural issues indicated by the divergence of trends with gold

Amidst recent geopolitical tensions, the vulnerability of cryptocurrencies has been vividly highlighted. While Bitcoin lost 6.6% of its value, gold rose by 8.6%, suggesting that the roles of both assets in market stress are very different. Behind this phenomenon lies the unique liquidity structure and monetization needs of cryptocurrencies.

As of January 29, 2026, the price of Bitcoin stands at $83.97, with a 6.23% drop in 24 hours, showing a susceptibility to market anxiety. In theory, Bitcoin was a healthy currency with censorship resistance, so it was supposed to hold its value during uncertain times. However, the reality is that when the situation is tight, it is the first asset that investors sell.

Monetization Pressure Brought About by Liquidity Advantage

The big difference between Bitcoin and gold is investor behavior during times of market stress. According to Greg Cipollaro, head of global research at NYDIG, cryptocurrencies are always tradable, highly liquid, and can be settled instantly, making them the easiest assets for investors to sell when they need to raise cash quickly.

This characteristic makes it easier for Bitcoin to act like an “ATM” (automated teller machine) in times of panic. As the market transitions to a risk-off environment, investors use cryptocurrencies as a means of cashing out to reduce portfolio risk and reduce VAR (value-at-risk). On the other hand, despite limited access, gold is more likely to be held than sold, continuing to serve as a true liquidity receptacle.

“During times of stress and uncertainty, liquidity preferences dominate, and this dynamic hits cryptocurrencies much harder than gold,” Cipollaro noted. While liquidity certainly exists for the size of cryptocurrencies, it is inevitable that there will be reflex selling pressure due to fluctuations in market conditions.

Division of Roles between Short-Term Panic and Long-Term Hedging

How the market prices risk widens the gap between gold and cryptocurrencies. The current disruption is seen as temporary caused by tariff and policy threats, as well as short-term shocks. Gold has long served as a hedge against that kind of uncertainty.

Central banks are buying gold at record highs, creating strong structural demand. In contrast, long-term Bitcoin holders are proceeding to sell, according to a report by NYDIG, leading to conflicting movements. On-chain data indicates that the old coin continues to move to exchanges, suggesting that a steady flow of cashing continues.

Divergence Shown by the Behavior of Large Holders

“As long as the market recognizes the risk as dangerous but not yet fundamental, gold will still be preferred as a hedge against short-term loss of confidence or war risks,” said Cipollaro. In contrast, cryptocurrencies are better suited for long-term concerns such as the depreciation of fiat currencies and sovereign debt crises.

The behavior of large holders is a clear reflection of market sentiment. While institutional investors such as central banks continue to accumulate gold, crypto investors are responding to short-term cashing needs. This “excess of sellers” is suppressing price support and intensifying downward pressure.

Differences in Appetite Between Crypto and Gold Timeframes

The essential difference between cryptocurrencies and gold lies in the corresponding uncertainty timescale. Gold has an excellent defense against short-term crises such as immediate loss of trust or military conflicts. On the other hand, cryptocurrencies are well-suited to hedge against monetary and geopolitical turmoil that takes place over years rather than weeks, as well as the slow erosion of trust.

For Bitcoin to play its original role, the market must recognize the current turmoil as a fundamental and long-term threat. However, for now, short-term panic is taking precedence, and the demand for cryptocurrency cashing out has outweighed the long-term investment value. Unless this structural challenge is resolved, it will be difficult for cryptocurrencies to establish themselves as digital gold.

As the market gradually becomes more aware of long-term risks, the inherent value of cryptocurrencies may be revalued. However, the reality is that the cashing pressure for liquidity is currently the biggest factor suppressing the Bitcoin market.