Gold, one of the oldest and most trusted stores of value, suffered a brutal sell-off in just 24 hours, wiping out trillions of dollars in market value, more than the entire value of Bitcoin.
The gold market extended Tuesday’s massive correction, with $2.5 trillion being erased from its market cap on Wednesday, according to the financial analysis publication, The Kobeissi Letter.
Putting gold on track for its largest two-day decline since 2013, the 8% drop has sparked panic among investors who had turned to the metal as a hedge against inflation and market volatility after its 60% surge earlier in 2022.
Although Bitcoin (BTC) — often dubbed “digital gold” for its capped supply — is known for far sharper daily corrections with double-digit percent declines, gold’s latest crash underscores that even “safe-haven” assets aren’t immune to steep sell-offs.
Gold’s 7% drop is rare: Here’s why it crashed
The scale of the correction is highly unusual and in theory would only happen “once every 240,000 trading days,” Alexander Stahel, a resources investor in Switzerland, observed in a post on X on Tuesday.
“Gold is giving us a lesson in statistics,” he said, adding that the asset has faced even bigger drawdowns since 1971, with such corrections counting 21 times.
Addressing the reasons behind the dip, Stahel pointed to the growing fear of missing out (FOMO), as “gold frenzy” momentum built up amid investors increasingly seeking exposure to gold equity, physical gold bars and tokenized gold.
“FOMO caused the latest leg up. Now, profit taking and weak hands got shaken out,” Stahel said, adding that statistically there are chances that “calmer days are ahead.”
Crypto Fear & Greed Index at lowest levels since 2022
As gold’s $2.5 trillion dip surpasses Bitcoin’s entire market cap of $2.2 trillion, some commentators highlighted the magnitude of the correction in comparison to the crypto market.
“In terms of market cap, this decline in gold today is equal to 55% of the value of every crypto currency in existence,” veteran trader Peter Brandt wrote in an X post on Tuesday.
Bitcoin, which has long been criticized for volatility as one of the key arguments against being a legitimate store of value, has also slipped 5.2% from its intra-day high of $114,000, though daily losses were about 0.8% at the time of writing, according to Coinbase data.
While Bitcoin spot exchange-traded funds (ETFs) also saw $142 million inflows yesterday, the broader crypto market momentum plunged into “Extreme Fear,” with the Crypto Fear & Greed Index plummeting to levels not seen since December 2022.
Related: Bitcoin-gold correlation increases as BTC follows gold’s path to store of value
Gold’s ongoing volatility came weeks after Deutsche Bank’s macro strategist Marion Laboure observed a set of parallels between gold and Bitcoin, which could potentially make the crypto asset an appealing store of value.
Deutsche Bank’s analysts also stressed that despite parabolically breaking new highs in dollar terms, gold only surpassed its real-adjusted all-time highs in early October.
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