Liquidity, Not Rates, Is Holding Bitcoin Back as Gold Absorbs Safe-Haven Flows, Kraken Economist Says

Bitcoin’s recent underperformance relative to gold is becoming a growing frustration for crypto investors, even as the broader macro environment appears supportive for digital assets.

According to Thomas Perfumo, Kraken’s Global Economist, the key factor weighing on crypto markets is not interest rates, but liquidity — and global liquidity conditions remain tight.

“Bitcoin’s recent underperformance relative to precious metals, particularly gold, is a source of frustration for crypto investors,” Perfumo said.

At first glance, the backdrop should favor Bitcoin. Falling interest rates and heightened geopolitical uncertainty have historically supported assets viewed as hedges against currency debasement and political instability.

Perfumo argues that rate cuts alone have not been enough to unlock stronger upside in crypto markets. “Despite rate cuts, global liquidity, the factor with the greatest influence on crypto market performance remains tight,” he said, showing that interest rates represent only one component of broader liquidity conditions.

Gold Continues to Attract Risk-Sensitive Capital

While crypto has struggled to regain momentum, gold has continued to benefit from shifting investor sentiment and macro tailwinds, particularly as the U.S. dollar weakens.

“By contrast, gold historically benefits from a weakening U.S. dollar,” Perfumo notes.

In the current environment, precious metals have increasingly absorbed flows from investors seeking stability, while Bitcoin’s role as a hedge has yet to reassert itself in the eyes of more cautious market participants.

“For now, gold is absorbing flows from more risk-sensitive investors,” Perfumo said.

Bitcoin’s Institutional Maturity Is Reshaping Its Narrative

Perfumo also pointed to a cultural transition underway within the Bitcoin market itself. As Bitcoin has matured into an institutional-grade asset, some of the volatility that once drew retail traders has diminished, altering its appeal and short-term narrative.

“As Bitcoin has matured into an institutional asset, the volatility that once attracted retail participants has diminished,” he said. Perfumo stresses that this shift is not necessarily permanent, but rather a phase that requires patience as the market adjusts.

Potential Catalysts for a Capital Re-Rotation

Despite Bitcoin’s lagging performance, Perfumo suggested that conditions could change quickly if capital begins rotating back toward crypto. “Any meaningful re-rotation of capital could quickly force a reassessment of relative performance,” he said, adding that current investor cynicism may set the stage for a sharper reversal.

He highlighted several potential catalysts that could help drive renewed inflows, including stabilization in long-term holder selling and progress on U.S. crypto market-structure legislation. “Factors such as the stabilization in long-term holder selling and progress on U.S. market-structure legislation could act as catalysts for that shift in flows,” Perfumo said.

For now, Bitcoin remains caught between supportive macro narratives and the reality of constrained liquidity — while gold continues to lead as the preferred hedge for risk-sensitive investors.