Safe haven switcheroo

With gold prices stunningly correcting, Bitcoin, that other so-called safe-haven asset, is quietly in the green. Fund flows have turned positive again. Whales, in their own kind of way, seem smitten with spot BTC ETFs.

As of 8:21 a.m. (EST), the largest crypto had reclaimed $109,000 on a 24-hour hike of about 1%. Earlier this morning, BTC touched above $110,000.

Meanwhile, decentralized trading hub Hyperliquid is on a heater. Its native HYPE shot up 8% in 24 hours to nearly $40 per token amidst reports that a soon-to-be-formed digital asset treasury company has secured $1 billion with which to potentially drench itself in HYPE. This new “DAT” entity, Hyperliquid Strategies, will result from a pending merger involving Nasdaq-listed Sonnet BioTherapeutics and Rorschach, a special purpose acquisition company, or SPAC. HYPE, with a market capitalization of $10.6B, is CoinGecko’s 18th-largest digital asset. Since hitting an all-time high close to $60 in mid-September, HYPE has shed roughly one-third of its value.

On Wednesday, gold cratered. The sharp downward move followed a terrible Tuesday. The result: a combined two-day drop of 8%, underscoring, as Cointelegraph pointed out, that even so-called safe-haven assets aren’t immune to steep sell-offs.

The gold market, viewed as a low-volatility safe space, watched $2.5 trillion get erased from its market cap just yesterday alone with spot gold prices plunging nearly 6%. That kind of one-day drawdown is considered rare. Although statistically, over 50-plus years, it’s hardly a black swan event. Such negative jolts have occurred at least 30 times since 1971, according to Alexander Stahel, a Swiss-based natural resources investment expert.

Stahel told Cointelegraph that a FOMO-induced “gold frenzy” had bubbled forth too fervently with more and more investors seeking exposure to gold ETFs, physical gold bars and tokenized gold.

The yellow metal has rallied rather spectacularly (+60% at one point) for much of this past year. On Monday, spot gold reached an all-time high of $4,381.21 per troy ounce (Reuters).

Broad-based crypto market sentiment fell into “Extreme Fear,” with the Crypto Fear & Greed Index sinking to levels not seen in nearly three years.

Concurrently, whispered murmurs of a potentially historic AI bubble forming in the stock market have become more fully throated.

And yet, after weeks of apt-for-October turbulence, the crypto market “found support” today, with BTC posting modest gains (CoinDesk).

BTC ETFs certainly have won over large holders who have been leaning on these publicly traded vehicles as a means of making stores of wealth more readily accessible. Thanks to a regulatory change this summer, allowing for in-kind deals, whales can hand their BTC to an ETF in exchange for shares of the fund. The transaction is for the most part tax-neutral, i.e. no cash changes hands. BlackRock has already facilitated more than $3 billion worth of these conversions, according to Bloomberg.

“The great irony is that Bitcoin was born to escape traditional finance,” chirped Wes Gray, CEO of Alpha Architect. “And now its biggest holders are trying to get back in.”

Which is not to say that relatively nascent on-chain infrastructure isn’t particularly robust right this moment.

In a research post earlier this week, per The Daily Hodl, Arca CIO Jeff Dorman said that, despite recent volatility, there are structural signs that rally conditions remain on the table.

Since a major wash-out in crypto was witnessed earlier this month, crypto exchange volume has steadily increased while open interest on decentralized perpetual futures platforms also has been resurgent.

“While the road ahead remains rocky,” Dorman said, “the cracks in sentiment and infrastructure are showing signs of healing.“