The Era of Great Rotation: What Does the Historic Gold Crash Mean for Bitcoin?

Article by: Axel Bitblaze

Article compiled by : Block unicorn

brief

Gold just experienced its worst day since the 1980s. Silver plummeted more than 30% in a few hours, marking its most volatile single-day drop in 45 years. The precious metals market lost approximately $3 trillion in market capitalization in a single trading day.

Meanwhile, the price of Bitcoin remained stable above $80,000, currently at $82,000. Although it has fallen, it hasn't crashed. (However, as of this writing, the price of Bitcoin has fallen below $80,000, having briefly dropped to around $77,000.)

This article will delve into the background, significance, and future trends revealed by the data of the event. It avoids blind optimism and alarmism, presenting only the data.

Key argument: We may be witnessing the beginning of a capital rotation event that will reshape institutional money's perception of "safe-haven assets," and Bitcoin is poised to benefit. But the road to this goal is far more complex than the cryptocurrency Twitter community acknowledges.

Part One: The Beginning and End of the Event

Data Overview

On January 30, 2026, precious metals experienced a crash that will be studied in financial textbooks for decades to come.

gold:

• It plummeted from an all-time high of $5,600 to $4,718.

• The daily drop reached 12%.

• This marks the worst single-day drop since the early 1980s.

• The intraday decline even exceeded the decline during the 2008 financial crisis.

silver:

• From $120 to $75-78

• The price dropped by 30-35% within hours.

• This marks the worst single-day performance since March 1980 (the Hunt brothers' era).

• It almost wiped out all of January's gains.

Platinum: Down 24%

Palladium: Down 20%

To better understand this drop: the gold market lost approximately $3 trillion in market value in a single trading day... If the losses in gold and silver are added together, the figure exceeds $8 trillion.

The following are reference values ​​for GDP of various countries:

1. United States: $30.5 trillion

2. China: $19.2 trillion

3. Germany: $4.7 trillion

4. India: $4.2 trillion

5. Japan: $4.2 trillion

Silver's volatility is even more pronounced. Only traders who experienced the Hunt brothers' collapse can truly grasp the magnitude of this phenomenon.

Triggering factors

The immediate catalyst was President Trump's nomination of Kevin Warsh to succeed Jerome Powell as the next Federal Reserve Chairman in May 2026.

The market initially interpreted Walsh as a hawkish candidate. His resume includes:

• He served as a Federal Reserve Governor from 2006 to 2011.

• Throughout his tenure, he was consistently one of the most hawkish members of the Federal Open Market Committee (FOMC).

• In 2010, they voted against a second round of quantitative easing (QE2).

• He had previously called for "regime change" at the Federal Reserve.

• Advocating for a significant reduction in the Federal Reserve's balance sheet

Following the announcement, the US dollar surged. Normally, a stronger dollar leads to weaker gold, but this time the movement far exceeded normal levels.

What actually happened: The precious metals rally was overheated. Gold prices rose 18% in January alone. Silver has risen more than 40% year-to-date. Warsh's statement was not the direct cause of the decline, but merely an excuse for the market to take profits.

“This is absolutely insane,” said Matt Marley of Miller Tabak. “This is very likely a forced sell-off. There’s a lot of leverage in the silver market. As prices plummet, margin calls are coming in.”

Feedback loop: Leveraged long positions are liquidated → Forced sell-off → Price crash → More margin calls → More forced sell-off. We've seen this pattern played out in the cryptocurrency space before. Today, gold and silver are also suffering the consequences.

Part Two: Macro Background

Why did gold prices rise so sharply before?

To understand the significance of this sharp drop, we first need to understand the factors that drove this surge.

Central bank purchases:

• In 2025, central banks around the world purchased a total of 863 tons of gold.

• Previously, it had purchased more than 1,000 tons of gold for three consecutive years (2022-2024).

• Poland alone has purchased 102 tons of gold, with a current goal of increasing its gold reserves to 30%.

• The total gold reserves of central banks around the world have now exceeded $4 trillion.

• For the first time since 1996, central bank gold holdings have exceeded U.S. Treasury bond reserves.

De-dollarization:

• The US dollar's share of global foreign exchange reserves has fallen from 70% in 1999 to 58% in 2024.

• In 2022, the United States froze more than $300 billion of Russia's foreign exchange reserves, raising concerns among non-aligned countries.

• Since 2018, China has been steadily reducing its holdings of US Treasury bonds.

• Gold offers protection against "jurisdictional risk" that government bonds cannot provide.

The US fiscal situation is deteriorating:

• National debt reaches $38 trillion

• The debt-to-GDP ratio has reached a record high of 122% since World War II.

• Debt interest payments will exceed $1 trillion by 2026.

• The Committee on Responsible Federal Budget warns of six potential crisis scenarios.

Geopolitical chaos:

• Tensions between the US and Iran escalate

• Uncertainty of the trade war

• Concerns about government shutdown

• Tensions in Greenland/Arctic region

• The situation in the Middle East is unstable.

The rise in gold prices is not due to speculation, but rather to genuine concerns about the stability of the existing financial order. Central banks around the world purchase more than 1,000 tons of gold annually not for speculative purposes.

The issue of "safe-haven assets"

Interestingly.

The whole value proposition of gold lies in the fact that it is the ultimate safe-haven asset, an asset you hold during times of turmoil, and a store of value that can last for 5,000 years, transcending the changes of empires.

However, this narrative has now fallen apart.

If your "safe-haven asset" drops 12% in a single day, and silver drops 30%, what exactly are you hedging against?

The cryptocurrency community has been emphasizing this point for years. Gold advocates always respond, "Bitcoin has fallen 80% in bear markets, while gold is stable."

All right.

Bitcoin has fallen 30% from its all-time high of $126,000 in October, a drop that has lasted four months. Gold fell 12% in four hours.

Silver's daily price fluctuations have even exceeded those of Bitcoin. So think about it carefully.

Does this mean that gold is no longer a store of value? No. Gold has withstood five thousand years of monetary evolution and it will still withstand this test.

This does challenge the notion that gold is immune to the volatility of "speculative" assets. When leverage accumulates and positions become overcrowded, even the world's oldest currency can fluctuate like junk money.

Part Three: Where did the funds go?

Wheel theory

Fundstrat's Tom Lee has been outspoken: gold and silver have been "sucking the oxygen from all assets," including cryptocurrencies.

The logic is simple. There is a pool of limited capital seeking to hedge the following risks:

• inflation

• Currency devaluation

• Geopolitical risks

• Financial irresponsibility

In 2025, the vast majority of this capital was invested in gold. Result:

• Gold: Up 66% by 2025

• Silver: Up 135% by 2025

• Bitcoin: Down 7% in 2025

Yes, Bitcoin fell throughout the year, while gold nearly doubled.

Institutional capital, which typically views Bitcoin as a portfolio diversification tool, has shifted towards more "safe" precious metal trading. For every dollar that flows into a gold ETF, one less dollar flows into a Bitcoin ETF.

The data confirms this:

• The Bitcoin ETF lost $4.57 billion between November and December 2025, marking its worst two-month performance ever.

• During the same period, inflows into gold ETFs reached a record high.

• Institutional investors have made it clear that they prefer the "stability of physical gold" to the volatility of cryptocurrencies.

But the essence of rotation is that it is bidirectional.

Historical mode

André Dragosch of Bitwise Europe documented a consistent lag pattern between gold and Bitcoin price increases. Using Granger causality tests, he found that gold tends to lead Bitcoin by 4-7 months.

The mechanism is as follows:

1. Crisis/Uncertainty emerges

2. Capital immediately flowed into gold, viewing it as a safe-haven asset.

3. Gold rises, Bitcoin lags behind

4. Once gold stabilizes or corrects, capital will shift to alternative assets with higher beta coefficients.

5. Bitcoin caught up thanks to leverage.

This pattern has appeared during the following periods:

• The impact of the 2020 COVID-19 pandemic: Gold rose first, followed by Bitcoin several months later.

• 2023 Banking Crisis: Gold Surges Immediately, Bitcoin Lags Behind, but Subsequently Outperforms Gold.

• End of 2025: Gold rises parabolically, Bitcoin stagnates... Is a rotation about to begin?

If this pattern continues, the sharp pullback in gold prices could become a catalyst for capital to re-evaluate Bitcoin.

Paul Howard of trading firm Wincent bluntly stated, "The cryptocurrency market has been a victim of the continued influx of venture capital into commodities trading. This dynamic may now be changing."

What is the options market saying?

An interesting data point: Despite Bitcoin's price being near its yearly low, options traders are still going long, betting on its rise.

The most actively traded contract is currently the February call option with a strike price of $105,000. Some January call options with a strike price of $100,000 have been rolled over to March call options with a strike price of $125,000… Traders have extended the trading period but raised their target prices.

This can lead to what's known as a "gamma squeeze." As spot prices approach these strike prices, market makers who sold these call options are forced to buy Bitcoin to hedge. This buying pressure creates a feedback loop, rapidly pushing prices higher.

The options market isn't always right, but it's where sophisticated capital places bets on price increases.

Part Four: Catalysts

Kevin Walsh: It's not what you think.

The market's initial reaction was to view Warsh as hawkish. The dollar surged, gold plummeted, and risk assets were sold off.

However, a closer analysis reveals that the situation is more complex.

Yes, Warsh was indeed a hawk in history. In 2009, at the height of the financial crisis, with unemployment at 9% and inflation at only 0.8%, he was concerned about inflation and voted against a second round of quantitative easing (QE2). He also called for a significant reduction in the Federal Reserve's balance sheet.

However, the following points are crucial for 2026:

Warsh has recently signaled a more dovish stance, arguing that increased productivity from artificial intelligence means interest rates could fall below levels predicted by traditional models. He believes Trump will not nominate Warsh unless some consensus is reached on interest rate cuts.

“We believe Warsh is a pragmatist, not an ideological hawk,” said Krishna Guha of Evercore. “Given his hawkish reputation and his perceived independence, he is more likely to align himself with the Federal Open Market Committee (FOMC) to cut rates at least twice this year, and possibly three times.”

The market currently expects 2-3 rate cuts in 2026. Warsh's appointment as Fed chairman in May will not change this trend; in fact, if he wants to prove he is not a "puppet of Trump," he may even accelerate the rate-cutting process.

Interest rate cuts = more liquidity = historically beneficial for Bitcoin.

Debt spiral

This is the elephant in the room; nobody wants to discuss it openly.

The U.S. national debt currently stands at a staggering $38 trillion. By 2026, interest payments will exceed $1 trillion. This surpasses the entire defense budget and is roughly equivalent to healthcare spending.

Ray Dalio has been warning about this for years. His recent view is: "My children and grandchildren, and even my great-grandchildren who are not yet born, will pay off this debt with a devalued dollar."

History shows that when a country accumulates such a huge debt, it rarely resolves the issue by cutting spending or hard default. Instead, it typically addresses the problem by devaluing its currency and printing more money.

This is the fundamental reason for being bullish on gold and Bitcoin. They are both "external currency" assets that central banks cannot print money on.

Gold has just proven that it is not immune to sharp market corrections. Bitcoin has always been highly volatile. But both represent questions about the sustainability of the current monetary order.

The Committee on Responsible Federal Budget has identified six potential crisis scenarios:

1. Financial crisis (market crash)

2. Inflation crisis (the Federal Reserve was forced to monetize its debt)

3. Austerity crisis (forced spending cuts)

4. Currency crisis (the US dollar loses its reserve currency status)

5. Default crisis (inability to repay debts)

6. A gradual crisis (a slow decline in living standards)

We may face some combination of these six crises. In each scenario, hard assets, whether gold or Bitcoin, will be more attractive relative to promises denominated in fiat currency.

ETF Fund Flow Dynamics

The situation regarding spot Bitcoin ETFs is often misunderstood.

Yes, there was a massive capital outflow at the end of 2025. Between November and December, $4.57 billion flowed out. That sounds catastrophic.

But the context is important:

• A large portion of this is the harvesting of tax losses at the end of the year.

• Three funds accounted for 92% of the capital outflow.

• BlackRock's IBIT fund continues to see inflows despite other funds experiencing capital outflows.

• $1.1 billion in new funds flowed in during the first week of January 2026.

ETF infrastructure hasn't disappeared. In fact, it has matured significantly:

• Institutional custody solutions are very robust

• Regulatory clarity has improved

• The financial advisor education program is expanding.

What has changed is the public opinion. In 2024, ETFs were a hot new thing; in 2025, gold became the hot new thing. The flow of funds in ETFs is affected by market trends, and these trends are constantly changing.

Standard Chartered's view: "The strategic significance of Bitcoin allocation remains. What has changed is the timing, not the theory."

Part 5: Price Scenario

Consensus Views

I have compiled predictions from major institutions and well-known analysts. Here are their views on 2026:

Bullish scenario ($150,000 to $225,000):

• Standard Chartered Bank: $150,000 (previously predicted to be $300,000)

• Bernstein: $150,000 by the end of 2026

• Maple Leaf Financial: $175,000

• Nexo: $150,000 to $200,000

• JPMorgan Chase: $170,000

• FundStrat (Tom Lee): $200,000 to $250,000

Baseline scenario ($110,000 to $150,000):

• Carol Alexander (University of Sussex): $75,000 to $150,000, with a median of $110,000.

• CoinShares: $120,000 to $170,000

• Citigroup: Baseline scenario $143,000, bullish scenario $189,000

• Polymarket: 45% chance of reaching $120,000, 21% chance of reaching $120,000 or $150,000.

Bearish scenario (US$60,000 to US$80,000):

• Jurrien Timmer: If the cycle proceeds as planned, support is expected at $65,000-$75,000.

• Peter Brandt: There is a 25% probability of a significant pullback to $55,000-$57,000.

• Fundstrat (Sean Farrell): If support levels fail, prices could fall to $60,000-$65,000 in the first half of the year.

My opinion:

The market generally expects a target price of around $120,000 to $150,000 for 2026. This represents an upside of 45% to 80% from current levels. While not as dramatic as predicted in early 2025, this is not a pessimistic outlook.

Key price levels to watch

• $80,000: A key psychological support level. This price level has been held multiple times. If this level is broken with volume, then $74,000 and $65,000 will become the next targets.

• $100,000: A psychological resistance level. If the market can regain and hold above this level, market sentiment will change significantly.

• $112,000: Target for a breakout from the ascending triangle pattern based on the current consolidation formation.

• $126,000: The previous all-time high. A break above this level would confirm the start of a new bull market phase.

Based on the data, I believe the most reasonable prediction scenario is as follows:

Short term (February to March): Prices continue to fluctuate between $78,000 and $95,000. Gold/silver volatility needs to subside. The Warsh confirmation process will introduce uncertainty. A retest of the $80,000 support level is possible.

Q2 2026 (April to June): Warsh will take office in May. If interest rate cuts materialize, liquidity will recover. Prices could break through $100,000 to $115,000. If the lagging pattern continues, the gold/Bitcoin rotation could accelerate at that time.

Second half of 2026:

It depends on the macroeconomic situation. If the Federal Reserve cuts interest rates 2-3 times and the dollar weakens, the price could reach $130,000 to $150,000. If the macroeconomic situation deteriorates faster than expected (e.g., a recession or credit crisis), Bitcoin may initially be sold off along with other assets before decoupling.

Frankly, nobody knows. The outcome is highly probable. Position sizing should reflect this uncertainty.

Part Six: Risks

Why this argument might be wrong.

1. Gold rebounds, but rotation never happens.

The sharp drops of the past two days may be a buying opportunity for gold, not a change in market dominance. Central banks remain net buyers. Geopolitical risks have not disappeared. Structural support for gold remains.

If gold stabilizes and resumes its upward trend, funds that "should" have shifted to Bitcoin may simply continue holding gold. Rotation theory dictates that gold prices will consolidate or decline over a longer period.

2. Bitcoin failed to decouple.

In severe risk aversion events, Bitcoin has never consistently served as a safe-haven asset. It typically sells off alongside stocks, then rebounds more quickly.

In the event of a broader market crash, economic recession, credit crisis, or escalation of geopolitical crisis, Bitcoin is likely to plummet along with other assets. The narrative of "digital gold" has yet to be validated in real-world stress tests.

Counterargument: Bitcoin doesn't need to be a safe-haven asset to outperform the market. It simply needs to attract capital seeking alternatives to traditional assets.

3. Regulatory/Political Risks

The regulatory environment in the United States has improved, but it is not without its flaws. Scandals, major cyberattacks, or political changes can all rapidly alter the market landscape.

The Federal Reserve's policy adjustments are generally considered to have a neutral to slightly positive impact on cryptocurrencies, but the Fed's policies can indirectly affect Bitcoin through liquidity conditions. If inflation accelerates again, forcing the Fed to raise interest rates rather than lower them, then everything will become unpredictable.

4. The four-year cycle has not disappeared.

Many analysts believe that Bitcoin's traditional halving cycle still holds true, which states that it peaks 12-18 months after a halving and then falls back by 80%.

The halving in April 2024 will push the cycle peak to around the end of 2025. Following this logic, we may already be in the early stages of a bear market, and the high of $126,000 in October may be the top.

Counterargument: Institutional demand driven by ETFs has altered the market structure. Cycles reliant on retail speculation may no longer be applicable.

But until the final result is out, we cannot know who is right and who is wrong.

5. Factors we have not yet considered

The greatest risks are always those that no one prices. Examples include the threat of quantum computing to Bitcoin's encryption; the collapse of large stablecoins; and black swan geopolitical events.

Position size should always take into account unknown factors.

Part 7: Position Allocation

How to think about this problem

I am not a financial advisor. This is not financial advice either. But the framework is as follows:

If you already own Bitcoin:

• Today's gold price plunge will not change the fundamentals of Bitcoin.

• The $80,000 support level is a key level to watch.

• If you've used too much leverage, today's market action serves as a reminder that volatility is two-way.

• The rotation theory is promising, but not inevitable.

If you are considering entering the market:

• It is unwise to rush into the market simply because "gold prices plummet, and Bitcoin prices will rise."

• Data suggests a possible rotation, but the timing is still uncertain.

• When volatility is high, dollar-cost averaging is better than a lump-sum investment.

• Be prepared for a potential pullback of $74,000 to $80,000.

If you hold gold/silver:

• The market conditions of the past two days were painful, but they did not negate the logic of long-term investing.

• Central banks around the world are still buying

• The financial situation is still deteriorating.

• Consider whether your position size is commensurate with the current volatility.

From a more macro perspective:

Both gold and Bitcoin are betting on the same fundamental logic: the current monetary order is unstable, and hard assets will outperform in the long run.

They are not mutually exclusive. The "gold vs. Bitcoin" argument largely stems from tribalism on Twitter. Savvy investors hold both assets simultaneously.

The events of the past two days demonstrate that both assets can experience significant volatility when positions are overly crowded. The "safe-haven" label does not protect you from liquidation cascades.

in conclusion

Gold just experienced its worst day in over 40 years. Silver, meanwhile, suffered its most dramatic drop since the Hunt brothers' tragedy.

In a single trading day, the market value of precious metals evaporated by approximately $3 trillion.

Meanwhile, Bitcoin fell to $82,000, but did not crash. (As of this writing, the price of Bitcoin had briefly fallen to around $77,000.)

Data suggests we may be at a turning point. The funds that flooded the gold market in 2025 now have reason to question the "safe-haven asset" narrative. Some of these funds may shift to Bitcoin following a historical lag pattern, which typically lasts 4-7 months.

But nothing is guaranteed. If the macroeconomy deteriorates, Bitcoin could plummet along with everything else. Gold prices might rebound and resume their upward trend, as the rotation effect may never materialize.

What we know for sure is:

• Central banks around the world are still buying gold (863 tons by 2025).

• The US debt is spiraling upward (US$38 trillion in debt, US$1 trillion in interest payments).

• The US dollar's status as a reserve currency is gradually weakening (reserve share 70% → 58%).

• Bitcoin ETF infrastructure has matured significantly.

• Institutional investors remain interested, even with fluctuations in fund flows.

• The Federal Reserve is likely to cut interest rates 2-3 times in 2026.

The current situation is quite interesting. A catalyst has just emerged. Now we'll wait and see if this theory holds true.

We'll soon find out what happens next.