The global financial landscape is shifting again as investors search for stability in a market rattled by inflation concerns, mixed economic signals, and uncertainty surrounding the Federal Reserve’s next policy move. With the Fed’s December 10 interest rate decision approaching, traders are increasingly hedging against what some fear could be a “policy error” — a scenario where monetary easing begins while inflation remains uncomfortably high.
As this tension unfolds, precious metals are emerging as the year’s standout performers, dramatically outperforming Bitcoin and even the strongest of the major stock indexes. The divergence between gold, silver, and digital assets is becoming a defining theme of the late-2025 macro cycle, reshaping how traders think about risk, hedging, and long-term store-of-value strategies.
Gold and Silver Leave Bitcoin Behind in 2025’s Performance Race
According to Trading Economics, both gold and silver have soared, delivering returns of:
- Silver: +86% YTD
- Gold: +60% YTD
Bitcoin, in stark contrast, has slipped into negative territory, showing a modest -1.2% YTD decline based on Yahoo Finance data.
For many investors, this dramatic separation reflects a shift in sentiment. Metals are classical hedges against inflation and monetary instability, and they are thriving at a moment when global macro conditions feel fragile and unpredictable.
Ryan McMillin, CIO of Merkle Tree Capital, explains the dynamic succinctly:
“A convergence of monetary debasement fears, macro uncertainty, and confused signals from the Federal Reserve is pushing investors into precious metals.”
As fears mount that the central bank may cut rates prematurely, traders are flocking to assets that historically retain value during periods of policy uncertainty.
The Fed “Policy Error” Anxiety: Why Investors Are Flocking to Hard Assets
The core concern driving the surge in gold and silver prices involves the potential for a Federal Reserve miscalculation.
Specifically, investors worry that:
- The Fed may cut rates while inflation remains sticky, especially in key categories like housing and services.
- Core PCE — the central bank’s preferred inflation gauge — is drifting upward again, nearing 3% annually.
- Financial conditions are already easing as markets anticipate rate cuts, raising fears of another inflation resurgence.
If rates fall too soon, the Fed risks igniting another inflation cycle, weakening the dollar, or destabilizing broader macro conditions. Historically, such environments send investors running to hard stores of value, including:
- Precious metals
- Commodities
- Defensive equities
- Short-duration bonds
- Cash-flow strong blue chips
This ongoing defensive rotation is particularly notable because it is unfolding before the Fed has taken any action. Markets are moving preemptively — often a hallmark of late-cycle economic behavior.
Bitcoin Struggles as Metals Shine: A Three-Way Market Divergence
2025 has brought a rare and fascinating three-way divergence across asset classes:
- Precious metals are surging
- Equities are rallying steadily
- Bitcoin is consolidating and underperforming
While metals soar on monetary-policy fears, traditional equities like the Nasdaq (+21%) and S&P 500 (+16%) are rising for more fundamental reasons:
- Earnings growth
- Share buybacks
- Big Tech capex tied to AI investment
- Stabilizing GDP growth
As McMillin puts it:
“Equities have been grinding higher in a very conventional way — earnings, buybacks, and AI-driven expansion. Bitcoin, meanwhile, is still recovering from the October liquidation shock.”
This means markets are currently experiencing two different cycles simultaneously:
- Stocks: Late-cycle melt-up
- Bitcoin: Mid-cycle repair
- Metals: Early-cycle hedge demand
This unusual split is creating opportunities — and confusion — among traders trying to determine the dominant trend heading into 2026.
Bitcoin Faces Mounting Short Pressure Ahead of Rate Decision
Data from futures markets shows that short positions on Bitcoin are building, as traders anticipate ongoing turbulence around the Fed decision. The cryptocurrency is still feeling the effects of:
- October’s massive liquidation
- Widespread deleveraging
- Post-ETF launch cooldown
- Reduced inflows into crypto products
- A stronger performance from metals and equities
While some investors see the current consolidation as a healthy reset, others worry that BTC could remain trapped in a wide sideways range until broader macro clarity emerges.
Bitcoin is currently trading between $94,000 and $82,000, a range it has occupied for more than two weeks, according to CoinGecko.
On-Chain Data Signals Capitulation—But Also Potential Strength
Despite Bitcoin’s sluggish price action, on-chain analytics offer a more nuanced interpretation.
Glassnode’s latest report shows:
- Short-term holder supply in loss is rising, indicating capitulation
- The market has pulled back to the true market mean, the cost basis of active coins
- BTC remains above deeper bear-market thresholds
These metrics point to a mid-cycle reset, not a transition into a full bear market. Historically, such resets often precede:
- Liquidity inflows
- Trend continuation
- New all-time highs (once key resistance levels break)
However, analysts warn that Bitcoin must reclaim the 0.85 quantile (~$106,200) to escape elevated macro sensitivity and resume a stronger trend.
Metals Continue to Benefit as Bitcoin Waits for Liquidity
While Bitcoin consolidates, gold and silver continue to thrive under the current macro backdrop:
- Sticky inflation
- Fed uncertainty
- Dollar volatility
- Slowing global growth
- Surging physical demand
Institutional flows have also favored metals in recent weeks — particularly in ETFs tied to silver, which has become one of 2025’s most volatile and profitable commodity trades.
Meanwhile, Bitcoin’s path is reliant on:
- Liquidity returning
- Stronger ETF inflows
- A shift in macro regime
- Confidence that the Fed will not misstep
McMillin remains optimistic:
“Bitcoin’s disconnect from metals and equities is likely temporary. Once liquidity improves and order books recover, we should see reconvergence.”
A Turning Point for Hard Assets, Risk Assets, and Digital Assets Alike
The current divergence between precious metals, equities, and Bitcoin isn’t a sign of market dysfunction — it’s a reflection of a rapidly changing macro environment. As investors brace for what could be the most consequential Fed decision of the year, the financial ecosystem is splitting into three camps:
- Metals for protection
- Equities for growth
- Bitcoin for long-term conviction — but short-term caution
Whether the Fed avoids or triggers a “policy error” will determine how these assets behave into early 2026. One thing is clear: the market is preparing for volatility, and investors are repositioning aggressively.
Precious metals may be the winners today, but Bitcoin’s mid-cycle reset hints that the digital asset could be setting the stage for a renewed breakout — once macro conditions finally align.