Why Did Bitcoin Surge and Gold Plunge on "Trump 2.0"?
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Why Did Bitcoin Surge and Gold Plunge on "Trump 2.0"?
The analysis suggests that "Trump 2.0" may lean more toward the "small government" philosophy, favoring decentralized assets like Bitcoin, while this fiscally prudent approach could also diminish gold's appeal as a safe-haven asset.
Navigating Web3 tides with focused insightsAuthor: Zhu Xueying, Wall Street Insights
"Trump trade" continues to surge, with Bitcoin emerging as the biggest winner! On Monday, Bitcoin surged past $88,000, rising over 11% during the session, while Bitcoin ETF trading volume exploded. Confidence in the crypto market is now soaring, with many betting this rally has only just begun and could continue right up to Trump's inauguration.
Bitcoin has gained over 25% since Trump showed signs of victory
Bitcoin ETF trading volume spiked on Monday
In contrast, gold—previously shining brightly—has underperformed. Since the election, gold prices have dropped sharply, falling below the 50-day moving average and approaching the critical support level of $2,600, dampening the enthusiasm generated earlier this month by repeated record highs.
$2,600 is a key psychological level for gold
The Bitcoin-to-Gold ratio is nearing its recent high
Why, within just a few days, has Bitcoin surged while gold plummeted? Analysts believe that "Trump 2.0" may lean more toward a "small government" philosophy, benefiting decentralized assets like Bitcoin. This fiscally cautious approach also undermines gold’s appeal as a safe-haven asset.
According to Bloomberg analyst John Stepek, Bitcoin rose primarily because many perceive Trump’s governance style as favoring "small government"—reducing state intervention and spending—rather than embracing "big government" policies supported by Modern Monetary Theory (MMT), which advocate expansive fiscal measures to boost growth. In such an environment, Bitcoin, as a decentralized asset, stands to benefit.
The drop in gold can be explained similarly. Markets previously assumed Trump’s return would automatically mean higher fiscal spending and larger deficits, which had served as strong support for gold prices for a time. But now expectations have shifted: Trump may avoid aggressively expanding government expenditure and instead adopt a more prudent fiscal stance. This diminishes gold’s safe-haven appeal and weakens its role as a hedge against inflation and uncertainty.
Additionally, as Spectra Markets analyst Brent Donnelly points out, this U.S. election cycle has made politicians acutely aware of public discontent over inflation. As a result, "Trump 2.0" may prioritize inflation control even more strictly, further weakening demand for gold while enhancing Bitcoin’s attractiveness as an emerging alternative asset.
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