Bitcoin on the sidelines as Dollar devaluation pushes investors to Gold: Why are digital currencies

We’re theoretically in the midst of the perfect conditions for a Bitcoin rally, so why is nobody buying crypto anymore? 

The weakening US dollar (USD), which in the past year alone has slipped more than 13% against the euro (EUR) and 7% against the Canadian dollar (CAD), has seen more investors flock to safe-haven options like gold, leaving the likes of Bitcoin on the sidelines. 

With Bitcoin often likened to ‘digital gold,’ this should’ve been the cryptocurrency’s time to shine. After all, BTC is far more agile than gold and is supported by its capped maximum supply of 21 million tokens, of which almost 20 million had already been minted. 

Instead, it was gold that went on a tear throughout 2025 as the primary safe-haven option for investors as the dollar dwindled. On January 29, the precious metal soared to a new all-time high of $5,586 before a market correction. 

Over the past five years, gold has rallied 150%, while Bitcoin has experienced growth of 103%. This mismatch would’ve seemed unimaginable to crypto enthusiasts in Q1 2021. Now, the superior performance of precious metals has driven more investors away from the cryptocurrency landscape. 

So, why has Bitcoin missed its opportunity to become the world’s favourite safe-haven investment? And can crypto recapture its weakening investor sentiment?

Debasement trade failings

The ‘debasement trade’ is built on the notion that a weakened dollar would lead to cryptocurrencies like Bitcoin and precious metals surging in value due to their safe-haven status and functionality as a hedge against devaluation.

But while metals like gold and silver reached record highs in recent weeks, Bitcoin failed to join the party, instead declining more than 11% in January alone. 

Not only is Bitcoin 37% adrift from its all-time high value of $126,080, the total crypto market cap fell 7% in 24 hours to $2.7 trillion on the final day of January, underlining fundamental vulnerabilities in the sector. 

According to a recent survey of crypto market participants, expectations for the currency’s price in 2026 ranged wildly from $75,000 to $200,000, indicating that those closest to the sector believed that a volatile year was on the way. 

John Blank, chief equity strategist at Zacks, suggested that Bitcoin may fall as low as $40,000 this year, with a downward trend likely to continue over the coming six to eight months. 

Fear dominates Bitcoin outlook

One of the biggest challenges that cryptocurrencies face when competing with traditional safe havens is that they’re highly speculative in nature, offering little in the way of tangible value. 

Because digital currencies like Bitcoin rely on market sentiment, negative perceptions surrounding crypto can be especially damaging. 

It’s for this reason that Bitcoin rallied to a new all-time high off the back of Donald Trump’s resounding election win, and subsequently, why its value struggled as election campaign pledges like a Strategic Bitcoin Reserve failed to match the expectations of investors when implemented. 

Despite Bitcoin’s pre-programmed scarcity, the coin still derives value from the willingness of investors to buy and sell at higher prices. With BTC sentiment falling to its lowest levels since November, it’s unclear whether there will be enough buying power and inflows to stage a meaningful recovery in the short term. 

According to CoinMarketCap data, the Crypto Fear and Greed index recently fell into ‘Extreme Fear’ territory for the first time in 2026. At a score of 15 out of a possible 100 as a measure of greed, the index entered February at its third-lowest ever reading since its inception in June 2023. 

Playing the long-game

Despite market sentiment for crypto dwindling in 2026, some industry leaders have struck a more optimistic tone, with Changpeng Zhao claiming that it’s natural for investors to favour traditional safe havens as a priority before looking to alternative assets later on.

Zhao suggests that when investors fail to find the stability that they’re looking for in commodities like gold and silver, they could look further afield to crypto. He also called for more education to be provided regarding cryptocurrency investing. 

While gold’s status as a physical asset means that it’s unlikely to have the same level of risk as crypto when it comes to the threat of losing the entirety of its value, crypto’s functionality and the fixed supply of Bitcoin offer a unique opportunity for investors who believe in the long-term potential of digital currencies. 

Access to BTC has been streamlined further in recent years with the launch of spot Bitcoin ETFs on Wall Street. This means that the ecosystem’s functionality is constantly evolving.

What’s next for Bitcoin?

Bitcoin needs investor sentiment to survive, and it appears to be in short supply at a time when investors are more focused on using gold as a safe-haven asset than crypto. 

There are some reasons for optimism, however. As markets show signs of recovery, we could see more investors stay wary of the dollar and opt for taking on more risk by holding crypto instead of stocks and shares. 

The fixed scarcity of BTC also means that new coins are being minted at a far slower rate, indicating that adoption doesn’t need to continue accelerating exponentially to drive the value of the cryptocurrency higher at the same rate. 

However, the clear favoring of precious metals over crypto at a time when the dollar continues to fall will be a major concern for even the most enthusiastic of Bitcoin supporters. The cryptocurrency’s road to recovery in 2026 could be pivotal for the entire ecosystem’s future.