Bitcoin has fallen below the $90,000 mark, while gold remains firmly above $4,000. This contest between digital assets and traditional precious metals is evolving into a bloody capital battle.

"I always thought gold would pop the Bitcoin bubble, but now it seems it might be silver," renowned economist Peter Schiff posted this shocking view on social media. Not long ago, he spoke out again, pointing out that Bitcoin has fallen about 40% when priced in gold and declaring Bitcoin's "digital gold" narrative completely bankrupt.

Market Status: The Life-and-Death Struggle Between Bitcoin and Silver

Recent rare divergence has appeared in financial markets. Silver prices soared above $45, hitting their highest level since 2011, while Bitcoin fell from its August all-time high, breaking below the key $90,000 support level.

This divergence in the trajectories of traditional precious metals and cryptocurrencies has drawn widespread market attention. Ethereum has not been spared either, falling more than 20% from its August peak, officially entering a technical bear market.

This decline triggered large-scale liquidations. In just one hour, over $1 billion in contract positions were liquidated on major global exchanges. Peter Schiff quickly seized on this market change, emphasizing that Bitcoin's performance relative to gold is even worse.

He pointed out that Bitcoin priced in gold has fallen 20% from its August high, meaning Bitcoin has officially entered a bear market relative to gold. "Bitcoin isn't living up to the hype," Schiff stated. "Since Bitcoin is promoted as digital gold, a 20% decline relative to the price of gold is more important than a decline relative to the US dollar."

Digital Gold Narrative: Truth or Bubble?

As Chief Global Strategist at Euro Pacific Capital, Schiff has always been a staunch supporter of gold and a sharp critic of Bitcoin. He believes that gold, based on its physical properties and limited supply, possesses millennia of stability and intrinsic value, whereas Bitcoin is a speculative bubble reliant on belief and hype.

Schiff noted that gold's total market capitalization is a massive $17.2 trillion, with market value growth in 2024 alone reaching $5.7 trillion, while Bitcoin's total market cap is only $1.1 trillion. He emphasized, "Gold's market cap growth in 2024 is already five times Bitcoin's total market value. This data challenges Bitcoin's narrative as 'digital gold'."

This view is supported by some data. The spot price of gold recently approached its historical high of $3,800, with a year-to-date increase of 42%, while Bitcoin's performance in the same period has been relatively weak. This contrast reinforces Schiff's belief in the superior store of value function of traditional precious metals over cryptocurrencies.

An analyst from blockchain analytics firm CryptoQuant stated that worryingly, the recent selling by "whales" coincides with worsening market sentiment and a slowdown in buying, which could put further pressure on Bitcoin's price.

Digital Asset Treasury Companies: Business Models Face Survival Test

So-called "Digital Asset Treasury Companies" refer to publicly listed companies that invest significant corporate funds into cryptocurrencies as reserve assets. MicroStrategy is the pioneer of this model, currently holding nearly 640,000 Bitcoins with a total acquisition cost of $47.33 billion.

The core of this business model is: companies raise funds by issuing stocks or bonds, then purchase large amounts of cryptocurrency, hoping that the appreciation of the cryptocurrency will bring returns far exceeding those of traditional businesses. In a bull market, this strategy indeed created astonishing returns; MicroStrategy's stock price soared significantly due to Bitcoin's rise.

This model carries fatal risks. Currently, MSTR's stock price has fallen below the $300 mark for the first time since April this year, nearly erasing all its year-to-date gains. Analyst Peter DeCarlo pointed out that MSTR's stock price has shown signs of a "breakdown," and if it cannot hold the current support level, it might further drop to around $240.

More worryingly is MicroStrategy's financing strategy. Part of the funds the company recently used to buy Bitcoin came from selling its own stock, which is extremely dangerous in a downward asset price cycle. Increasing positions in highly volatile crypto assets by selling equity is equivalent to amplifying risk in a falling market.

Whale Selling Puts Pressure on Market Liquidity

Bitcoin fell below the key $90,000 level last week. Recent selling by "whales" (investors holding large amounts of cryptocurrency) and other long-term holders has become a significant driver of the recent weakness in Bitcoin's price.

Most blockchain analytics firms define "whales" as individuals or institutions holding 1,000 or more Bitcoins. Although most whales' identities are unknown, blockchain data can still provide clues about their activities by tracking their cryptocurrency wallets.

Data shows that some whales have recently accelerated their pace of Bitcoin selling. Martin Leinweber, Digital Asset Product Strategist at MarketVector Indexes, said such selling might reflect "planned asset allocation." "Some Bitcoin investors bought when the price was in the single digits and waited for so long. Now there's finally enough liquidity to sell without completely disrupting the market," he told MarketWatch.

Fund flows into investment products reflect weak demand – as of recently, Bitcoin exchange-traded funds (ETFs) experienced outflows for the fifth consecutive week, the longest streak of consecutive outflows since the week ending March 14.

05 Retail Investors: Where to Go in the Current Market?

Facing market volatility, retail investors are in a particularly difficult position. Data shows a certain trend of retail investors leaving the A-share market. Although from a market development perspective, retail investors leaving should be a positive signal, it shouldn't be because they are forced to leave due to disappointment and frustration.

A similar situation is playing out in the cryptocurrency market. Schiff warned that Bitcoin being transferred from long-term holders to "weaker investors" will lead to more severe future pullbacks.

He said Bitcoin is "finally having its IPO moment," adding that the Bitcoin market now has sufficient liquidity for long-term holders to cash out. "So much Bitcoin moving from strong to weak hands not only increases the float but also means future selling will be larger," Schiff added.

Vineet Budki, CEO of venture capital firm Sigma Capital, also pointed out that retail investors are likely to sell Bitcoin at the first sign of trouble, adding that a lack of confidence among retail investors will cause the next bear market price drop of 70%.

However, some analysts hold different views. Bitfinex analysts said Bitcoin's fundamentals remain strong and attractive to institutional investors, who will continue to adopt Bitcoin and drive demand.

Data shows that over 100 companies emulating MicroStrategy now face severe tests. Many companies have market capitalizations lower than the value of the cryptocurrencies they hold, falling into the predicament of "trading at a discount." The mNAV (a key valuation metric used to compare a company's market capitalization to the value of its Bitcoin holdings) of Michael Saylor's Strategy company has plummeted from above 2.5 to just 1.2.

The ultimate winner of this contest is yet to be determined, but one thing is very clear: the market is re-evaluating the "digital gold" narrative. For Bitcoin to truly prove itself, it needs to demonstrate its resilience in headwinds, not just its gains in tailwinds.