Gold Overtakes Bitcoin: When Ultra-Loose Monetary Policy Favors Traditional Safe Havens

Gold Overtakes Bitcoin: When Ultra-Loose Monetary Policy Favors Traditional Safe Havens

Recent developments in financial markets raise a fundamental question: Why does gold benefit significantly more from expansionary monetary policy than Bitcoin, even though both are considered hedges against currency devaluation? The landslide election victory of Japanese Prime Minister Sanae Takaichi and her announced ultra-loose monetary policy have made this discrepancy strikingly visible. While gold recaptured the psychologically important $5,000 mark, Bitcoin remains in relative lethargy despite its theoretical advantages as a digital store of value.

This observation highlights the still-different perception of both assets during times of crisis – and simultaneously shows that the Bitcoin community itself is divided when it comes to optimal portfolio allocation.

The Facts

The clear victory of Prime Minister Sanae Takaichi in the Japanese parliamentary elections triggered a remarkable rally in financial markets on Monday. The Nikkei 225 surged approximately 4.3 percent to a new record high, while gold recaptured the $5,000 mark ^[1]. Bitcoin, however, gained merely 1.5 percent and is currently trading at around $71,000 ^[1].

Since Takaichi's governing party now holds a two-thirds majority, investors expect unimpeded implementation of her economic agenda known as "Sanaenomics." This is based on aggressive government spending and continuation of ultra-loose monetary policy ^[1]. The associated inflation concerns and yen weakness led to a significant flight to real assets – with gold clearly functioning as the preferred safe haven ^[1].

A recent survey of the BTC-ECHO community with 14,349 votes cast paints an interesting picture: Around two-thirds of respondents indicated they are not increasing their investments in precious metals at the expense of crypto. A good quarter, however, are currently betting more on precious metals, while a smaller proportion remains undecided ^[2].

The survey suggests less of a broad exodus from crypto and more of increasing diversification. Precious metals benefit doubly in such market phases: On one hand, they are considered inflation protection and stores of value; on the other hand, they are more familiar to many investors and act as more credible hedges than Bitcoin during crises ^[2]. However, experts expect that the strong economic stimulus from Japan will shape global markets for some time and thus should also have a positive effect on Bitcoin's price in the long term ^[1].

Notably, hybrid solutions have now also become established: Investors can now invest in tokenized precious metals and thus combine both worlds ^[2].

Analysis & Context

Bitcoin's muted reaction to the Japanese monetary flood reveals an important insight: In acute crisis moments and sudden monetary policy shifts, investors still reflexively turn to established safe havens like gold. While Bitcoin may theoretically possess superior properties as a store of value – limited supply, no state control, global transferability – in practice it still lacks decades of proven performance across various crisis scenarios.

The fact that the crypto market, according to sources, is "still digesting the recent Bitcoin crash" partially explains the restraint. Historically, however, a recurring pattern emerges: Bitcoin often reacts to macroeconomic impulses with a time delay. While gold, as a liquid, established market, immediately responds to monetary policy signals, Bitcoin frequently requires weeks or months before expansionary monetary policy translates into rising prices.

The diversification strategy visible in the survey appears rational against this backdrop: A portfolio containing both traditional precious metals and Bitcoin benefits from the immediate crisis reflexes of the gold market, while remaining positioned for Bitcoin's potentially stronger medium-term gains. The thesis of "historic undervaluation of Bitcoin relative to precious metals" could prove accurate once the immediate crisis sentiment subsides and investors again take more risk-tolerant positions.

Crucial will be how global inflation expectations and interest rates develop. Should Japan's ultra-loose monetary policy actually lead to sustainably higher inflation and cause other central banks to rethink their approach, this could strengthen Bitcoin's narrative advantage as "digital gold without a printing press" in the medium term.

Conclusion

• Gold reacts faster and more strongly to monetary policy impulses than Bitcoin, reflecting different market maturity and established crisis behavior of investors – Bitcoin typically requires more time for macroeconomic impacts to materialize

• Two-thirds of surveyed crypto investors are sticking with their digital assets despite the precious metals rally, while a quarter are actively diversifying – a sign of increasing portfolio sophistication rather than panicked reallocation

• Japan's "Sanaenomics" with aggressive government spending and ultra-loose monetary policy could boost both asset classes in the medium term, with Bitcoin potentially benefiting disproportionately from a possible loss of confidence in fiat currencies

• Bitcoin's historic undervaluation relative to precious metals, combined with its superior monetary properties, makes a later rotation from gold to digital assets appear possible once immediate crisis sentiment subsides

• Tokenized precious metals already offer a bridge technology today that combines traditional real assets with the advantages of blockchain infrastructure and softens the rigid separation between both worlds