For more than a decade, Bitcoin’s most reliable pitch has been its comparison to gold. Fixed supply. No central bank knob to turn. No dilution on a politician’s timetable. That framing did real work. It pulled in long-term holders, macro allocators, and institutions that wanted something outside the fiat system without going full libertarian.
But narratives only survive if price action doesn’t embarrass them.
New research from Grayscale suggests that the “digital gold” label is wobbling. In a note authored by Zach Pandl, the firm argues that Bitcoin’s recent behavior looks far less like a defensive asset and far more like a high-beta growth trade. Grayscale hasn’t abandoned its long-term conviction. But short-term reality is making that conviction harder to defend with a straight face.
Markets don’t price philosophy. They price behavior.
And lately, Bitcoin has been acting less like gold and more like a leveraged expression of risk appetite.
When the Hedge Doesn’t Hedge
The entire “digital gold” argument hinges on correlation, not mythology. Gold doesn’t need to rally in every crisis to justify its role. It just needs to not collapse alongside equities when stress hits.
Bitcoin hasn’t passed that test consistently.
Pandl’s analysis points out something uncomfortable: even as gold and silver pushed to record highs, Bitcoin failed to follow. Instead of moving with precious metals, it moved with growth assets. More specifically, with software stocks.
That matters. A lot.
If Bitcoin sells off when growth stocks sell off, it doesn’t diversify portfolios. It concentrates risk. And once an asset behaves that way often enough, asset allocators stop pretending otherwise.
I’ve seen this shift happen quietly over the past couple of years. Bitcoin still gets talked about as a hedge, but it’s traded like something else entirely.
The Software Stock Tell
The most striking part of the Grayscale note isn’t the drawdown itself. It’s what Bitcoin is correlated with.
Since early 2024, Bitcoin’s correlation with software equities has climbed steadily. That relationship snapped into focus during the 2026 selloff. Software stocks rolled over. Bitcoin followed. Almost tick for tick at times.
This wasn’t random.
Software equities entered 2026 under pressure after investors started questioning long-duration growth assumptions. AI wasn’t just a tailwind anymore; it became a threat. If artificial intelligence can commoditize large parts of the software stack, then lofty valuations suddenly look fragile.
So capital rotated out.
Bitcoin rotated out with it.
From its October peak above $126,000, Bitcoin fell roughly 50%. The timing lined up cleanly with the software drawdown. Same fear. Same repricing. Same macro sensitivity.
That’s not how gold behaves.
Success Changed Bitcoin’s Personality
One reason this correlation shift exists is simple: Bitcoin won.
It’s no longer a niche instrument sitting outside the financial system. It’s been pulled directly into it.
Spot Bitcoin ETFs accelerated that process. Once those products went live, Bitcoin became just another line item in multi-asset portfolios. That changed everything.
ETFs:
- Lowered access friction
- Attracted traditional allocators
- Tied Bitcoin flows to broader risk management decisions
When portfolio managers de-risk, they don’t debate Bitcoin’s philosophical purity. They hit the sell button. Right alongside software stocks, semiconductors, and other volatile exposures.
That’s the trade-off. Institutional adoption brings liquidity and legitimacy, but it also drags Bitcoin into the same current that moves equities.
You don’t get one without the other.
How the 2025–2026 Drawdown Actually Played Out
Grayscale doesn’t describe this as a single crash. It was a sequence.
The first major hit came in October 2025 during what Pandl calls a historic liquidation event. Excess leverage got flushed. Hard. That cleared positioning, but it didn’t restore confidence.
Late November brought another wave. Then late January 2026 added more pressure as equities weakened and macro uncertainty crept back in.
More recently, Grayscale flagged something subtle but telling: persistent price discounts on Coinbase compared to offshore venues. That usually signals localized selling rather than global panic.
In plain terms? U.S.-based sellers were motivated. ETF outflows. Tax considerations. Institutional rebalancing. Not retail capitulation.
That kind of selling pressure doesn’t show up in dramatic headlines. It just grinds price lower.
Why Gold Did What It Was Supposed to Do
While Bitcoin struggled, gold did its job.
It rallied.
That divergence wasn’t just symbolic. It reinforced why gold still occupies a unique position in the financial system. Central banks hold it. It’s used as collateral. It isn’t priced off growth expectations or adoption curves.
Gold doesn’t care about AI disruption or software margins.
Bitcoin does.
Pandl makes a fair point here: the idea that Bitcoin would displace gold within a decade was always optimistic. Gold had thousands of years to embed itself into global finance. It anchored the monetary system until the early 1970s.
Bitcoin is barely old enough to drive.
Long-Term Store of Value, Short-Term Risk Trade
Grayscale draws a clear line between structural properties and market behavior.
Structurally, Bitcoin still checks the boxes:
- Fixed supply
- No central bank control
- Global portability
- Censorship resistance
Those attributes don’t vanish just because price is volatile.
But markets don’t operate on whitepapers. They operate on liquidity, sentiment, and positioning. And on those dimensions, Bitcoin behaves like a growth asset far more often than a hedge.
That doesn’t kill the long-term thesis. It complicates it.
Liquidity Is the Hidden Driver
Bitcoin’s sensitivity to macro liquidity has intensified as its investor base matured.
When liquidity is loose, Bitcoin thrives. Leverage builds. Speculation returns. Price explodes. When liquidity tightens, Bitcoin gets hit harder than most.
That’s textbook risk-asset behavior.
Right now, the environment isn’t friendly. Real yields are high. Monetary policy is cautious. Short-term U.S. Treasuries offer mid-single-digit returns with zero volatility.
That’s competition Bitcoin didn’t face in earlier cycles.
When you can earn real yield without risk, the bar for holding volatile assets goes up.
Retail Isn’t Showing Up (Yet)
Another drag on Bitcoin is the absence of broad retail enthusiasm.
Market maker Wintermute noted recently that retail attention has drifted toward AI-related equities and other growth narratives. Bitcoin isn’t the center of the speculative universe anymore.
That’s a change.
Historically, retail participation amplified Bitcoin’s rebounds. Without it, recoveries tend to be slower and more fragile, relying on institutional flows that are often more tactical than emotional.
Narratives compete. Right now, Bitcoin is competing with AI, automation, and tokenized equity stories for attention.
And it’s not clearly winning.
Correlation Isn’t Permanent, But It Isn’t Random Either
One thing worth stressing: correlation regimes change.
Bitcoin won’t always trade like software stocks. A sovereign debt scare, inflation resurgence, or loss of confidence in fiat systems could revive the hedge narrative quickly.
Pandl is careful not to declare the “digital gold” idea dead. He frames Bitcoin’s evolution as gradual. Monetary roles aren’t assigned overnight. They’re earned over decades through infrastructure, trust, and repeated stress tests.
Bitcoin hasn’t passed all of those tests yet.
A Digitized Future Still Favors Digital Money
Grayscale also looks forward.
Pandl sketches a future shaped by AI agents, programmable markets, and tokenized assets. In that world, digitally native money has advantages that physical commodities don’t.
Bitcoin’s relevance may end up coming less from correlation metrics and more from where economic activity migrates over time.
That’s speculative. But it’s not absurd.
Bitcoin was designed for an internet-native economy. We’re still in the early innings of figuring out what that actually means.
What This Means for Portfolios Right Now
For investors, the takeaway is practical, not ideological.
Bitcoin should not be treated as a short-term hedge against equity drawdowns. Recent behavior argues strongly against that assumption.
In portfolio terms, Bitcoin currently behaves like:
- A high-volatility growth asset
- A long-duration adoption bet
- A liquidity-sensitive macro exposure
That doesn’t make it uninvestable. It makes it misunderstood when slotted next to gold.
Gold hedges risk today. Bitcoin amplifies it.
Conflating the two leads to bad positioning.
The Narrative Is Being Rewritten, Not Erased
The “digital gold” story isn’t gone. It’s being forced to grow up.
Markets are drawing a line between what Bitcoin might become and how it actually trades right now. That gap has widened in this cycle.
For the moment, Bitcoin’s fate is tied less to bullion and more to risk appetite, liquidity, and the evolution of growth narratives across global markets.
That’s not a failure. It’s a stage.
Bitcoin is still in transition. And transitions are messy.
Disclaimer
This article is for informational and educational purposes only and does not constitute financial, investment, trading, or legal advice. Cryptocurrencies, memecoins, and prediction-market positions are highly speculative and involve significant risk, including the potential loss of all capital.
The analysis presented reflects the author’s opinion at the time of writing and is based on publicly available information, on-chain data, and market observations, which may change without notice. No representation or warranty is made regarding accuracy, completeness, or future performance.
Readers are solely responsible for their investment decisions and should conduct their own independent research and consult a qualified financial professional before engaging in any trading or betting activity. The author and publisher hold no responsibility for any financial losses incurred.