The cryptocurrency market has remained stuck in a prolonged downturn, which many participants now openly describe as a bear market. This label appears increasingly difficult to challenge.
After a brutal 35% decline, the market erased more than $1 trillion in value, marking one of its steepest periods of capitulation in recent cycles.
Market liquidity also continued to decline. What makes the current environment particularly striking is the growing divergence between asset classes. As liquidity dries up, precious metals have seen an aggressive rally, with gold and silver offering sustained upside while digital assets sink further into weakness.
This growing gap highlights a broader shift in investor behavior. As traditional investors move away from exposure to cryptocurrencies, precious metals are strengthening their grip as the market’s preferred safe haven.
Traditional investors are abandoning crypto ETFs
Traditional investors continued to liquidate their positions in major digital assets, including Bitcoin (BTC), Ethereum (ETH), Solana (SOL)and XRP, via US spot ETFs.
Bitcoin ETFs bore the brunt of the selling. More than $1.33 billion was withdrawn from the market, pushing outflows to levels last seen in November, when sales momentum sharply intensified.
Ethereum ETFs followed a similar trajectory, seeing net withdrawals of $611 million, comparable to the sell-off seen in mid-December.
Source: Sosovalue
The XRP US Spot ETF recorded its first negative weekly net flow, with $40.6 million withdrawn from the market.
This was a sharp reversal from the previous week, when capital inflows jumped to $56.83 million, the highest figure in January. Solana was the only exception, managing to maintain positive weekly entries. Despite this, the $9.57 million added represented the lowest entry on record.
The steady pace of outflows indicates a clear change in sentiment. For many institutional players, digital assets no longer offer the risk-reward profile they once did.
Instead, capital seems to be turning to assets that promise stability and actually deliver it.
Precious metals absorb capital flight
Precious metals extended their rally, led decisively by gold and silver. Together, they now rank among the most valuable asset classes in the world, with market capitalizations of $34.64 trillion and $5.81 trillion, respectively.
Since the broader crypto market declined in October, silver has reached new highs, while digital assets continue to probe lower levels.
During this same period, silver added a value roughly equivalent to the entire market capitalization of Bitcoin. Gold and platinum also saw strong and sustained gains.
This renewed appetite for precious metals was fueled by rising geopolitical tensions, notably involving the United States and several European countries, which amplified risk aversion on global markets.
Concerns about the weakening purchasing power of the US dollar have further accelerated this shift. In times of uncertainty, investors have once again turned to precious metals as reliable safe havens.
For digital assets, often classified as risky investments, the implications are stark. Capital inflows remain limited as investors prioritize capital preservation and more predictable returns, a framework that currently favors precious metals.
A path to healing?
The prospects for a near-term crypto market recovery remain uncertain. Geopolitical risk has already pushed investors to safety, but a bigger challenge lies in changing global liquidity dynamics.
Global liquidity continued to grow, reaching a record $162 trillion. Historically, such expansion has acted as a tailwind for crypto markets, with higher liquidity closely aligned with rising digital asset prices.
Global liquidity reflects the total money supply and credit circulating in the global financial system. Under normal conditions, this would be a favorable environment for crypto.
Source: TradingView
However, since November 15, a striking decoupling has appeared. As the global liquidity index continues to climb, the crypto market is trending downward. This divergence suggests that capital is flowing elsewhere, disrupting turnover patterns that once favored digital assets.
Some market participants nevertheless remain cautiously optimistic.
A more favorable macroeconomic backdrop may emerge with the appointment of a new Federal Reserve chairman, whose policy may prove more accommodative toward risk assets, including cryptocurrencies, in the long term.
Final Thoughts
- Capital outflows and weakening funding conditions have now been recorded across all four major U.S. cryptocurrency spot exchange-traded funds, highlighting a sharp decline in institutional conviction.
- Precious metals continue to shine. Silver has emerged as the best-performing pattern, seeing the biggest gains as the crypto market remains trapped by persistent selling pressure.
