Bitcoin Lagged Gold as Fed Tightened in 2025

Core Insights - Bitcoin underperformed gold in 2025 as the Federal Reserve reduced its balance sheet, while gold benefited from geopolitical tensions and sovereign demand [1] - The divergence indicates that Bitcoin is more closely tied to credit availability in the financial system rather than simply acting as "digital gold" [1] - The outlook for 2026 suggests a potential reversal, with political pressure to expand credit possibly favoring Bitcoin over gold [1] Group 1: Market Dynamics - Bitcoin's price movements are directly correlated with the Federal Reserve's balance sheet changes, falling when the Fed tightens and rising during expansions [1] - Gold outperformed Bitcoin throughout 2025, leading to confusion among investors who viewed Bitcoin as a straightforward alternative to gold [1] - Alternative cryptocurrencies experienced greater declines than Bitcoin as monetary conditions tightened in 2025, with Bitcoin regaining its dominant market position [1] Group 2: Future Outlook - The setup for 2026 appears more favorable for Bitcoin due to anticipated political pressure to lower interest rates and expand the Fed's balance sheet [1] - Historical patterns indicate that the Bitcoin-to-silver ratio has bottomed out every 14 months before reversing, suggesting a potential upcoming shift [1] - Regulatory clarity and a new Federal Reserve chair are expected, although there is uncertainty regarding whether these factors are already reflected in current valuations [1]