Key takeaways
What is driving the shift from gold to cryptocurrencies?
Gold’s 6.8% fall – the biggest in 12 years – coincided with Tether’s $1 billion creation, suggesting investors are reallocating capital towards digital assets.
How are institutions responding to this market shift?
Institutional investors poured $619 million into Bitcoin and Ethereum ETFs, showing renewed confidence in crypto despite broader market volatility.
The crypto market has remained volatile in recent days, marked by increased investor outflows.
As a reminder, the total market capitalization, which reached a record $4.27 trillion on October 6, fell more than 16% to $3.59 trillion, erasing nearly $1 trillion in value.
However, sentiment appears to be changing following major market moves over the past day. As investors abandon gold, Bitcoin (BTC) and Ethereum (ETH) are seeing renewed support.
Gold decline opens new door for crypto
Tuesday October 21 was a shock for many traditional investors.
Gold, after hitting a record high of $4,381 an ounce on Monday, plunged 6.8%, its biggest decline in 12 years, signaling a sudden change in investor sentiment.
The traditional safe-haven asset was trading at $4,036 at press time, trending lower and showing signs that it could pull back towards the $3,000 range.
Interestingly, this release coincided with a massive influx into the crypto market. Tether, the issuer of the USDT stablecoin, minted an additional $1 billion worth in the last 24 hours.
Source: Lookonchain
Since October 11 – the start of the recent market downturn – approximately $7 billion worth of USDT and USDC stablecoins have entered circulation.
Such an increase in the supply of stablecoins generally indicates stronger demand from crypto investors, either to hedge against volatility or to prepare for buying opportunities in major cryptocurrencies.
Although AMBCrypto could not confirm whether this was primarily a defensive or accumulation move, traditional investors appear to have already made their choice.
Traditional Investors Ditch Gold and Embrace Digital Assets
Institutional investors, through accredited crypto exchange-traded funds (ETFs), have turned their attention to digital assets, this time with a notable twist.
Data from SosoValue shows that Bitcoin and Ethereum ETFs saw combined inflows of $619 million on Tuesday, with no matching outflows.
Spot US Bitcoin ETFs attracted $477 million, while Spot US Ether ETFs saw $127 million in inflows.
Source: SosoValue
This suggests that gold’s decline, Tether’s billion-dollar currency, and $619 million in ETF purchases may all indicate that traditional investors are reallocating their capital into crypto.
Nevertheless, Bitcoin and Ethereum remained slightly down: 0.3% and 1.26%, respectively.
Shawn Young, chief analyst at MEXC Research, confirmed this to AMBCrypto, saying:
“Gold’s recent decline appears to be a healthy correction after a prolonged rally. Its timing, alongside Tether’s $1 billion USDT coin, suggests that capital is not leaving the market but rather being repositioned. Stablecoin inflows of this magnitude often precede a resumption of activity in digital asset markets.”
Crypto analyst Vincent Oretega, however, cautioned that such stablecoin inflows do not necessarily signal a bullish reversal, warning that they could instead reflect a bearish repositioning.
Signs of a crypto health recovery
Data from the Crypto Fear and Greed Index suggests that investors are slowly regaining confidence.
Although still in the “fear” zone at 29, the index is up from 27 earlier in the week – a modest but notable improvement.
Meanwhile, the Altcoin Index remains subdued, indicating that the market is in a “Bitcoin season,” where Bitcoin generally outperforms the rest of the market.
For now, continued flows will likely only benefit a few select assets, with Bitcoin appearing to be the main beneficiary.
Source: CoinMarketCap
