Bitcoin Faces $1 Trillion Identity Crisis as Institutions Dump Holdings, Is It Really Digital Gold?

▲ Bitcoin (BTC) decline / ChatGPT-generated image

Bitcoin (BTC) is facing a severe identity crisis as it loses its status as digital gold and shows increasing correlation with risk assets, triggering a large-scale withdrawal of institutional funds.

According to crypto-focused media outlet BeInCrypto, U.S.-listed spot Bitcoin ETFs have recorded net outflows totaling $3.8 billion over the past five consecutive weeks. This is interpreted as a decisive indicator that institutional investors are taking a conservative view on Bitcoin’s short-term outlook and focusing on risk management. After reaching $96,000 in January, Bitcoin has since fallen to the $65,000 range, enduring strong downward pressure.

Among crypto hedge funds and institutional investors, doubts are growing over Bitcoin’s unique identity. While gold prices have surged to $5,500 per ounce, proving their value as a safe-haven asset, Bitcoin has instead plunged in tandem with the stock market. In fact, the correlation coefficient between Bitcoin and gold has dropped to negative 0.27, reinforcing the view that the narrative of Bitcoin as digital gold has collapsed.

The correlation between Bitcoin and the stock market rose to 0.75 earlier this year, marking an all-time high. This demonstrates that Bitcoin no longer exhibits an independent price trajectory and is being treated similarly to tech-heavy risk assets such as the Nasdaq. Hedge funds have strengthened algorithmic trading strategies to control Bitcoin’s volatility, and such mechanical selling has contributed to amplifying price declines.

The market’s Fear and Greed Index has fallen to 14, entering a phase of extreme fear. Investors are increasing their cash holdings, concerned that if Bitcoin fails to defend the $65,000 support level, it could decline further to the low $60,000 range. The number of active addresses on the Bitcoin network has also dropped significantly compared to periods of price increases, raising warnings that the fundamental demand base is weakening.

Whether Bitcoin remains merely a speculative asset or reemerges as a central pillar of a new financial order depends on the direction of upcoming macroeconomic indicators. Without the reentry of institutional capital or major positive developments such as government-level declarations of Bitcoin holdings, the current period of price stagnation is likely to persist. Experts believe it will take considerable time for Bitcoin’s fundamental scarcity and decentralized value to be recognized by the market again.

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