Gold surpassed $5000 against ETH, when will the crypto market reverse?

Author: zhou, ChainCatcher

Do you remember the hot prediction event on Polymarket last October?

"First to $5,000: Gold or ETH?"

At that time, the price of Ethereum surged to around $4,800, and the market gave it an 80% chance of breaking through $5,000, with many believing that the era of digital gold had arrived.

Three months later, the market has provided an answer.

On January 26, spot gold broke through $5,100 per ounce, while Ethereum remained fluctuating between $2,800 and $3,000, with the overall cryptocurrency market in a slump.

In the face of extreme uncertainty in the macro environment, capital has collectively turned to the most traditional safe-haven assets, while cryptocurrencies, as high-volatility risk assets, were the first to be sold off.

Gold Soars, Crypto Market Votes with Its Feet

The driving force behind gold's rise comes from multiple macro factors.

First, the signals of hedging against dollar credit risk are becoming increasingly evident. The Danish academic pension fund AkademikerPension announced it would liquidate about $100 million in U.S. Treasury bonds by the end of the month, citing serious concerns about the U.S. fiscal situation. Sweden's largest private pension fund Alecta also disclosed that it has significantly reduced its holdings of U.S. Treasury bonds since early 2025, amounting to about $7.7 billion to $8.8 billion. Institutions view U.S. policy uncertainty and ongoing debt expansion as core reasons.

Second, geopolitical risks have intensified. In just under a month since the beginning of 2026, several major global events have occurred, including the U.S. proposing to "strong buy" Greenland, a raid to capture the Venezuelan president, imposing a 25% tariff on countries trading with Iran, and further chaos within Iran. Coupled with the prolonged stalemate of the Russia-Ukraine conflict, geopolitical issues have not eased in the new year but rather show signs of worsening.

Additionally, inflation and currency devaluation pressures continue. Central banks' massive liquidity injections and the monetization of fiscal deficits are constantly diluting the purchasing power of fiat currency. Gold and silver, as hard assets, naturally become the preferred choice for capital seeking safety.

Against this backdrop, institutional views on gold are rapidly turning optimistic. OCBC has raised its gold price target for the end of 2026 to $5,600 per ounce; Goldman Sachs has also significantly adjusted its expectations, raising its year-end target from $4,900 to $5,400.

They emphasize that the continued buying by private investors and emerging market central banks is squeezing limited gold supply. Data shows that global central bank net gold purchases exceeded 1,100 tons in 2025, and are expected to maintain a pace of over 60 tons per month in 2026. With the possibility of the Federal Reserve restarting interest rate cuts, gold ETF holdings have also begun to rebound.

On the cryptocurrency side, the investment enthusiasm for on-chain gold has also reached new heights. According to Coingecko data, the total market capitalization of tokenized gold has surpassed $525 million, and tokenized silver has also set a historical record. According to Lookonchain monitoring, a certain whale has lost $18.8 million on ETH in a short period and is now doubling down on gold. It spent $36.04 million to buy 7,536 XAUT at an average price of $4,786, currently showing an unrealized profit of $2.3 million.

However, the cryptocurrency market presents a starkly different picture, with Bitcoin down 30% from last year's peak and Ethereum down about 40%. Last week, both Bitcoin and Ethereum spot ETFs recorded massive net outflows: Bitcoin ETF saw a net outflow of $1.33 billion (the second-highest weekly outflow in history), while Ethereum ETF had a net outflow of $611 million.

As of January 20, the earnings of the two largest crypto treasury companies varied. Bitcoin treasury company Strategy (MSTR) holds a total of 709,715 BTC at an average cost of $75,979, with an unrealized profit of $10.813 billion. Ethereum treasury company Bitmine (BMNR) holds a total of 4,203,036 ETH at an average cost of $3,857, with an unrealized loss of $3.232 billion.

Market sentiment is clearly leaning bearish. The famous trader and chart analyst Peter Brandt, who successfully predicted the Bitcoin crash in 2018, stated that the Bitcoin bear market channel has been completed and has issued another sell signal. He pointed out that Bitcoin's price needs to rise to $93,000 to offset the sell signal. Bloomberg analysts even believe that Ethereum has a higher chance of falling below $2,000 in the short term than returning to $4,000.

Capital Rotation: The Day Gold Stops Rising Could Be the Day Crypto Reverses?

However, the sluggishness of the cryptocurrency market is more of a phase of capital rotation. In extreme risk-averse periods, capital flows typically first into zero credit risk assets like U.S. Treasuries and gold, and only gradually returns to the stock market and cryptocurrency market after the peak of risk has passed.

Currently, the collective rise of gold, silver, and some commodities represents the most concentrated phase of defensive allocation. Once gold approaches institutional target price levels and momentum weakens, or if a major macro risk shows signs of easing, profit-taking may begin to seek the next high-return opportunity. At that time, deeply corrected and fully washed-out leveraged crypto assets will become the most natural recipients.

Specifically for Bitcoin and Ethereum, the signals for bottoming are becoming increasingly clear.

For Bitcoin, large realized losses on-chain are often a classic bottom characteristic. CryptoQuant data shows that Bitcoin's realized losses have reached $4.5 billion, the highest level in three years. The last time this occurred, Bitcoin's price was trading at $28,000 after a brief adjustment period of about a year.

On the institutional side, Bitcoin treasury companies are continuously increasing their BTC holdings through financing schemes, especially after MSCI decided not to remove DAT from the index, with passive funds like Vanguard following up by buying MSTR stock. Arthur Hayes publicly stated that the core trading strategy for this quarter is to go long on MSTR and Metaplanet.

Ethereum's situation is similar. On one hand, over 36 million ETH are currently staked, accounting for nearly 30% of the circulating supply, with the exit queue close to zero, as validators express their long-term confidence in the network through their actions. On the other hand, BitMine recently received shareholder approval to increase the cap on the company's issuable stock to enhance future financing flexibility, likely continuing to increase its Ethereum holdings.

It is worth mentioning that currently, the probability of BlackRock executive Rieder succeeding the Federal Reserve chair is close to 50%, clearly leading over competitors. Market analysis suggests that if this event comes to fruition, his friendly stance towards RWA and the crypto ecosystem will bring significant momentum to the crypto market.

However, history has proven countless times that when precious metals' markets go crazy, they are completely irrational.

How high can gold rise next? No one knows. What needs to be done now is not to guess where the top is, nor to short it. In an era of inflation cycles and credit re-evaluations, it is difficult to say that gold has peaked.

Loyal crypto investors may have to patiently wait for the rotation signal to appear. Hopefully, that day comes sooner than we think.

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