Why has Bitcoin become weak as a "hedge" against geopolitical turmoil while gold rises

Last week, as geopolitical tensions escalated following Trump’s threats of tariffs against NATO allies in Greenland, we observed an interesting pattern in the market: Bitcoin rose as most investors sought safety, while gold became the preferred protection. Bitcoin has fallen by 6.6% since January 18, whereas gold has increased by 8.6% reaching nearly $5,000. This highlights the fundamental differences in how these two assets perform as a “hedge” or protection in times of need.

Bitcoin as an “ATM” during fear

The reason behind Bitcoin’s sell-off is not too complicated. Under market stress, investors seek quick cash. Bitcoin, with its continuous trading and deep liquidity, becomes the first choice for those needing funds. “Despite its liquidity for its size, Bitcoin remains more volatile and is sold off voluntarily because leverage is no longer used,” according to Greg Cipolaro, Global Head of Research at NYDIG.

This is the “ATM effect” reflecting a deeper issue: in stressed markets, liquidity and quick access to cash are more important than long-term protections. Bitcoin, even as a digital asset that doesn’t require physical storage, has become a tool for risk reduction and immediate fundraising, not for long-term store of value.

Gold remains a true “hedge” for short-term fear

Gold’s behavior is unusual. Instead of selling, large holders—particularly central banks—continue to buy. Gold has reached record-high buying levels by central banks, creating strong structural demand. “The opposite dynamic is happening with gold. Large holders, especially central banks, are continuing to accumulate the metal,” Cipolaro says.

This psychological and structural support has transformed gold into a more stable “hedge” against immediate geopolitical uncertainties. It doesn’t get sold when markets are tired; institutions keep buying.

Why Bitcoin is better for long-term uncertainty

But Bitcoin doesn’t perform well on the wrong metric. Its true strength lies in a different kind of risk. “Gold is excellent during moments of immediate loss of confidence, war risks, and fiat declines without the complete collapse of the system,” Cipolaro writes. “On the other hand, Bitcoin is more suitable for safeguarding against long-term financial and geopolitical turmoil and the slow erosion of trust that occurs over years, not weeks.”

Bitcoin is designed for deeper structural concerns—such as fiat currency inflation, return of government control, or long-term monetary collapse. But during short-term and episodic market shocks, it is more vulnerable.

Current market picture

As of now (January 29), Bitcoin remains at $88.28K with a 24-hour decline of 1.00%. Ether is at $2.96K (-1.70%), Solana at $123.72 (-2.75%), BNB at $903.50 (+0.06%), and Dogecoin at $0.12 (-2.84%). The overall weakness in the crypto space reflects greater investor caution and a preference for traditional safe havens like gold.

Lesson for investors

The key takeaway is simple: Bitcoin and gold are not interchangeable as “hedges.” Bitcoin is better as a long-term hedge against monetary system collapse, while gold is more effective in short-term geopolitical and market panics. For a balanced portfolio that protects against all kinds of uncertainty—from episodic market stress to long-term currency debasement—combining both is more prudent than assuming Bitcoin can serve as a complete replacement for gold.

Markets remind us that there is no one-size-fits-all “hedge.” Asset allocation should reflect your time horizon and the specific risks you want to protect against.