Gold vs. Bitcoin: Why Tight Liquidity Supports Precious Metals Over Crypto
By Muhammad Umair | Published: Dec 03, 2025
Market Overview
In 2025, gold has shown resilience while Bitcoin has experienced a decline after reaching record highs. This shift is attributed to tightening liquidity, increased financial stress, and capital outflows favoring precious metals over cryptocurrencies.
Macroeconomic Drivers
The Secure Overnight Financing Rate (SOFR) is currently testing 4.0%, indicating stress in the $12 trillion repo market. This elevated rate suggests a funding shortage, compelling commercial banks to fill the liquidity gap, which is draining resources from financial markets.
Additionally, the St. Louis Fed Financial Stress Index is nearing zero, highlighting systemic pressure. The Treasury General Account (TGA) remains high, further restricting cash flow into the economy and contributing to the tight financial conditions observed.
Bitcoin's Current Position
Bitcoin has retreated from its October 2025 peak, reflecting the broader market's tightening liquidity. Currently, it is attempting to rebound from the $80,000 support level. A failure to maintain this level could lead to further declines, while a rise above $105,000 would indicate renewed bullish momentum.
Despite potential Federal Reserve rate cuts, the overall macro environment remains unfavorable for short-term crypto strength due to ongoing funding pressures and unwinding carry trades.
Gold's Performance
Gold is trading within an ascending channel and has formed a bottom near the $4,000 mark, signaling renewed strength. The demand for gold as a safe-haven asset is increasing amid rising financial risks, with expectations that it could reach the $4,500 resistance zone if current trends continue.
Institutional Preferences
In 2025, gold has outperformed Bitcoin, with gains exceeding 50% this year, while Bitcoin has faced significant declines. This divergence reflects institutional investors' preference for safety during tightening financial conditions. Gold's established role in central bank reserves further solidifies its demand.
Despite Bitcoin's recent downturn, its long-term trend from 2023 remains intact, suggesting potential for recovery if it can maintain support near $80,000.
Conclusion
Gold is currently the stronger asset in a market characterized by liquidity stress, benefiting from its safe-haven status and institutional demand. If financial conditions remain tight, gold is likely to continue its upward trajectory. Conversely, Bitcoin's reliance on liquidity and leverage poses challenges, although it may find support and recover if it breaks above key resistance levels.