The Breakdown - Is the Gold to Bitcoin Rotation Underway?

Episode Date: October 23, 2025

Gold’s record-breaking rally just snapped with its biggest one-day drop in over a decade, and now traders are asking whether the long-anticipated rotation from gold into Bitcoin has begun. In today���s episode, NLW breaks down what caused gold’s blow-off top, why even small capital shifts from the $20 trillion gold market could send Bitcoin soaring, and how new Fed policy, Tether’s explosive growth, and whale flows into ETFs are reshaping the balance between crypto and traditional finance. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, October 22nd, and today we are asking if the gold to Bitcoin rotation is on. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, gold fever broke on Tuesday as bullion prices saw their largest drawdown in 12 years. Gold has been on an absolute tear this year, but the rally over the past two months has been

one for the record books. Prices were up 26% from the beginning of September, extending year-to-date gains of 68%. And despite what Peter Schiff might tell you, gold typically isn't a high-performing investment. It averages around a 6% compound annual growth rate, so this year has been a massive outlier. To find another year that looks anywhere close to this, you have to go all the way back to 1979, when Nixon closed the gold window and prices shot up by 123%. And even in a hot year, the past two months have been one of the most notable rallies in the modern history of gold markets. Central Bank purchases, trade war concerns, and simple momentum had gold stuck in overbought territory for weeks on end. Last week, we started to see

lines around the block in major global capitals to buy gold in person, a site that many took as a sure-fire top signal. The jitters were starting to show on the trading floors as well. Oleg Hanson, commodity strategists at Saxo Bank said, in the last couple of trading sessions, traders have increasingly been looking over their shoulders as concerns about a correction and consolidation have arisen. And sure enough, the correction came swift and hard on Tuesday with gold plummeting by 6.3%. One interesting corollary to the crash is that we have very little knowledge of what happened thanks to the government shutdown. The CFTC usually publishes a weekly commitment of traders' reports that discloses net positions in the derivatives market. Without that report, traders were flying blind

on just how over-leveraged the market had become. We did, however, have data. from the stock exchanges, which reported record call option volume for the 3x leveraged gold ETF. Interestingly, there wasn't a single headline anyone could point to that triggered the crash. Bloomberg just referenced potential positive tradeout comes with China, dollar strengthening, overstretched technicals, and the end of seasonal buying in India to explain it. Usually that means the explanation is just a dip that cascaded into a leveraged unwind. Sure enough, one of the major institutional exchanges announced that they had increased margin requirements on Tuesday, which could have pushed trading firms out of their positions. Many crypto folks took the

opportunity to apply the tired cliches about the dangers of Bitcoin investing to a new target. On-chain analyst checkmate, he wrote, gold and silver collectively destroyed trillions of dollars of market value held by all these poor retail investors lining up to buy it recently. I don't know how those metal pumper crooks can look themselves in the mirror after fleecing these people of their hard-earned savings. Trader Alex Becker tweeted, In shocking news, gold is crashing as Uber drivers and your divorced aunt didn't

perfectly time the next 1930s crash. Who could have seen this coming? Now, the most intriguing question for Bitcoiners, however, is whether all of the excess speculation in gold is going to rotate into Bitcoin. We've seen this multiple times before. Gold consolidated for four months this summer lining up almost perfectly with Bitcoin's massive rally coming out of the first tariff announcement. The same trailing price action occurred in late 2024 and late 2020. The pattern is prevalent enough that many believe that Bitcoin trails a move in gold by three to four months, which would set Bitcoin up for a big move starting fairly soon. Other analysts have

suggested the rotation will be more mechanical, with traders taking off their gold longs and rotating directly into Bitcoin as the next hard asset to run. The concept was the subject of multiple research notes this week. Bitwise researchers noted on Monday that the rotation wouldn't even need to be that large to make a gigantic impact. They wrote, you only need between 3 and 4% in capital rotation for Bitcoin to double from here. For a few hours on Tuesday, that seemed to be exactly what was playing out. Bitcoin added almost 5% to reach 114,000 on Tuesday morning as gold collapsed. Adelis Will Clemente tweeted, Am I hallucinating or are we literally watching a gold to Bitcoin rotation on the tape this morning?

Pomp was pounding the table, posting, yesterday I told you it was time for the for the great rotation from gold into Bitcoin. Today, the rotation started. Alas, it wasn't to be, and Bitcoin quickly broke down into the afternoon. It ended the day as a complete round trip, trading back below 108K by market close. TXMC wrote, absolutely vicious price action. 5% moves both ways in a half a day. Amazing. Even though the rotation failed on Tuesday, there are still many true believers that Bitcoin will have its turn soon. Trader Michael Vandepope wrote, A pretty harsh move on gold, as it corrected by more than 6% on the day. Initially, Bitcoin moved up massively, but gave it back as well. I don't think this will last. The volatility on gold is super high.

That's due to the fact that it's a massive outlier which we've witnessed in recent months. I do think gold has peaked for the moment and that would mean that money should rotate towards other assets. Bitcoin to start running as risk on appetite comes back in play. VJ. Boyapati, meanwhile, had a different takeaway commenting, gold is showing us something very important. Even a $20 trillion asset can have a parabolic move. You're crazy if you think a $2 trillion asset like Bitcoin can't double or triple within a few months. Ultimately, no one knows what comes next, but sentiment has definitely shifted as a result of this blow-off top in gold. Just a few days ago, it seemed like everyone was calling for the end of the cycle.

Now it feels like the rotation from gold to Bitcoin is becoming a consensus view. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. Communities and builders are left behind while capital sits locked out. Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the world's first blockchain purpose-built for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure, networks can now be financed in real time, operated more efficiently and scaled to meet the $3 trillion telecom and utilities market.

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The defy industry is not viewed with suspicion or scorn. Rather, today, you are welcome to the conversation on the future of payments in the United States and on our home field, something that would have been unimaginable a few years ago. The comments follow a similar speech from Waller at the Wyoming Blockchain Symposium, which took place alongside Jackson Hole in August. However, this is no longer just about rhetoric. Waller had a seismic policy announcement as well. He said, I believe we can and should do more to support those actively transforming the payment system. To that end, I have asked the Federal Reserve staff to explore the idea of what I am calling a payment account. The payment accounts would be skinny

master accounts, allowing a range of unconventional financial firms to gain access to the Fed's payment rails without needing a banking charter. He said that all institutions who currently do business through a third-party bank would be eligible. So that presumably includes crypto exchanges, stablecoin issuers, and crypto custodians. Anyone who followed the saga of Custodia Bank attempting to get a master account knows how big this policy change would be. It would allow crypto firms to interface with Tradfai payments rails like ACH and Swift. It could also mean some form of access to the discount window and other emergency liquidity programs. Most of all, however, it would mean that crypto firms would have direct access to the payment rails and can't be cut off by their banking

partners. Custodia Bank CEO Caitlin Long rejoiced, tweeting, Thank you, Governor Waller for realizing the terrible mistake the Fed made in blocking payments-only banks from Fedmaster accounts and reopening the access rules the Fed enacted to keep Custodia bank out. The Fed told courts that such firms would put financial stability at risk for being inherently unsafe and unsound. Thank you for admitting that's not true. It never was true. Wyoming's special purpose depository institutions have been trying to get to this point for five years. To Cher Jay and the co-founder of multi-coin capital remarked, Second-order effects of this will be fascinating. Why take risk to deposit at a traditional bank

versus using a narrow bank that only holds T-bills? Narrow banks will have lower expenses and will pass more interest to depositors. Narrow banking means less risk and higher interest for depositors. Arthur Hayes commented, imagine if Tether didn't need to rely on a crappy Tadfai bank for its existence. The Fed is quickly moving to destroy commercial banking in the U.S. This is Trump's revenge for debanking his family. Speaking of Tether, that company has hit another milestone as stablecoin adoption continues to skyrocket around the world. CEO Paulo Arduino tweeted, Tether USDT officially reached 500 million users,

likely the biggest financial inclusion achievement in history. That would mean around 6% of the global population is a tether user. Now, that figure is based on data from chain analysis and Artemis, so it was presumably just tracking the number of wallets holding tether. Paulo shared a chart that showed the user base had doubled since the beginning of 2024. And while there are probably many people who hold many tether accounts, you're still likely talking about hundreds of millions of people using tether, an incredible achievement no matter what. And alongside user-based growth, Tether's market cap continues to

climb as well. They're now at 182 billion and haven't had a flat month since mid-20203. Market cap is now doubled since the beginning of 2024. We've had no news on Tether's rumored fundraising at a $500 billion valuation, but with numbers like this, the pitch decks must be turning a few heads. Lastly today, an interesting tidbit from BlackRock, who said Bitcoin whales have put billions into their ETFs. In July, the SEC changed the rules to allow ETF shares to be created by depositing Bitcoin. This allowed Bitcoin Wales to exchange their Bitcoin directly for iBit shares without triggering a capital gain or a gigantic tax bill. Speaking with Bloomberg on Tuesday, Robbie Michnik, BlackRock's head of digital assets, said the firm has already facilitated over $3 billion

of this type of translation. He said that after years of self-custody, many whales are recognizing the, quote, convenience of being able to hold their exposure within their existing financial advisor or private bank relationship. Bloomberg noted that converting Bitcoin into iBit shares lets investors use it as collateral, borrow against it, and include it in estate plans, which are all much more difficult to go with self-custody Bitcoin. West Gray, the CEO of VTF firm Alpha Architects said, life is just easier in Tradfai land. We've spent a century perfecting integration, access, and security. Bitcoiners are finally realizing that. The great irony, of course, is that Bitcoin was born to escape traditional finance, and now its biggest holders are trying to get back in. The other side of this trend is

that self-custody is in its first sustained downtrent in the history of Bitcoin. Glass-node data shows the the number of entities custodying their Bitcoin has dropped from 13,000 when the ETFs launched to around 8,000 today. Now, this is a fairly natural consequence of the institutionalization of Bitcoin. In previous cycles, not your keys, not your coins, was drilled into newcomers because crypto exchanges had such a terrible reputation, and the lesson was learned the hard way in 2022. The idea now, however, of Coinbase Cracken or even Binance going bankrupt and taking your Bitcoin with them is much more unthinkable. And if Blackwood, crock disappears with your Bitcoin than the world probably has much larger problems. Now, this brings up

all sorts of questions. There is the principle of self-custody. There are questions of the sustainability of the network. I expect there to be a lot more discourse around that in the future, but for now, it's clear that many whales are choosing to move at least part of their holdings into the Tradfai system. Irony be damned. That's going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.