Why a selloff in gold and silver is dragging bitcoin down
Bitcoin has long been lumped in with precious metals as a hedge against a weakening dollar. That trade is unwinding on a hawkish Fed, and bitcoin is falling alongside the metals it was supposed to rival.
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Summary
- A broad unwinding of the so-called debasement trade is hitting gold, silver and bitcoin at once, as investors retreat from scarce assets once seen as protection against currency erosion.
- A newly hawkish Federal Reserve under Chair Kevin Warsh and a stronger dollar are lifting real yields, making non-yielding assets like gold, silver and bitcoin less attractive and more expensive for foreign buyers.
- Bitcoin, which lagged metals on the way up but is now closely tracking their decline, has fallen about 50 percent from its peak even as it has recently outperformed gold and silver on a relative basis, underscoring its dual role as both a speculative asset and a hard-money hedge.
