Why Precious Metals Outperform Crypto in a Rate-Cut Regime

As the Federal Reserve inches closer to its December 2025 rate-cut decision, investors are recalibrating their portfolios to navigate the shifting macroeconomic landscape. With the CME FedWatch tool indicating an 83.2% probability of a rate cut at the December 10 meeting, the market is pricing in a structural shift toward accommodative monetary policy. This environment, characterized by declining real interest rates and inflationary pressures, has historically favored hard assets like gold and silver. In contrast, Bitcoin's liquidity vulnerabilities and sensitivity to macro shocks-such as the yen carry-trade unwind-highlight its fragility in a rate-cut regime.

The Macroeconomic Case for Precious Metals

Gold and silver have surged in 2025, driven by a confluence of supply constraints, inflation hedging, and central bank demand. Gold prices reached record highs above $4,000 per ounce, with central banks purchasing 219.9 tonnes in Q3 2025 alone-a 28% increase from the prior quarter. This trend reflects a global shift toward de-dollarization, as countries like China, India, and Russia diversify their reserves into gold to hedge against currency devaluation. Meanwhile, gold ETFs saw dramatic inflows of 221.7 tonnes in Q3 2025, reversing years of outflows and signaling renewed institutional confidence.

Silver, meanwhile, has been propelled by both industrial demand and speculative buying. Prices broke through $51 per ounce in 2025, fueled by its critical role in green energy technologies like solar panels and electric vehicles. Supply constraints further underpin its price, as global mining output remains stagnant and recycling activity limited. The gold-to-silver ratio has also widened, underscoring gold's dominance as a safe-haven asset in times of macroeconomic uncertainty.

Bitcoin's Liquidity and Macro Sensitivities

Bitcoin's performance in late 2025, however, tells a different story. ETF outflows were driven by a concentrated basis trade unwind rather than broad institutional capitulation, with key issuers like Grayscale and 21Shares experiencing significant redemptions. This selling pressure was exacerbated by the unwinding of the yen carry trade, triggered by rising Japanese government bond yields and expectations of a Bank of Japan rate hike. As investors exited risk assets, Bitcoin's price plummeted, with average weekly trading volumes hitting some of the lowest levels since July 2025.

Unlike gold and silver, Bitcoin lacks the intrinsic value and supply constraints that anchor its price during macro shocks. Its reliance on leveraged ETFs and thin liquidity makes it particularly vulnerable to sudden market corrections. For instance, the $150 billion wipeout in Bitcoin's market capitalization following the Japan yield shock illustrates how quickly sentiment can shift in a leveraged and speculative market.

Strategic Rebalancing Toward Physical Assets

With the Fed poised to cut rates in December 2025, the macroeconomic tailwinds for precious metals are clear. Gold and silver benefit from their dual roles as inflation hedges and stores of value, while their supply fundamentals remain robust. Central bank purchases and ETF inflows suggest a structural reallocation toward hard assets, a trend likely to accelerate as real interest rates remain negative.

In contrast, Bitcoin's exposure to macro shocks and liquidity risks makes it a less reliable hedge in a rate-cut regime. Investors seeking stability and long-term value may find greater assurance in physical metals, which have historically outperformed during periods of monetary easing. As the "debasement trade" gains momentum, the case for rebalancing portfolios toward gold and silver becomes increasingly compelling.