Gold, one of the oldest and most reliable stores of value, suffered a brutal sell-off in just 24 hours, wiping out trillions of dollars in market value, more than the entire value of Bitcoin.
The gold market extended Tuesday’s massive correction, wiping $2.5 trillion off its market capitalization on Wednesday, according to financial analysis publication The Kobeissi Letter.
The 8% drop, putting gold on track for its biggest two-day drop since 2013, has caused panic among investors who had turned to the metal as a hedge against inflation and market volatility after its 60% rise in early 2022.
Although Bitcoin (BTC), often referred to as “digital gold” for its limited supply, is known for much steeper daily corrections with double-digit percentage drops, gold’s latest drop underscores that even “safe haven” assets are not immune to heavy selling.
Gold’s 7% Drop Is Strange: Here’s Why It Plunged
The scale of the correction is very unusual and would theoretically only occur “once every 240,000 trading days,” noted Alexander Stahel, a resources investor in Switzerland, in a post on X on Tuesday.
“Gold is giving us a statistics lesson,” he said, adding that the asset has faced even bigger declines since 1971, with such corrections counted 21 times.
Addressing the reasons behind the drop, Stahel pointed to the growing fear of missing out (FOMO), as “gold frenzy” momentum built amid investors increasingly seeking exposure to gold stocks, physical gold bars and tokenized gold.
“FOMO caused the latest advance. Now, profit-taking and weak hands have been shaken out,” Stahel said, adding that statistically there is a chance that “calmer days are ahead.”
Crypto Fear & Greed Index at lowest levels since 2022
As gold’s $2.5 trillion drop surpasses Bitcoin’s total market capitalization of $2.2 trillion, some commentators highlighted the magnitude of the correction compared to the cryptocurrency market.
“In terms of market capitalization, this drop in gold today is equivalent to 55% of the value of every cryptocurrency in existence,” veteran trader Peter Brandt wrote in an X post on Tuesday.
Bitcoin, which has long been criticized for its volatility as one of the key arguments against being a legitimate store of value, has also fallen 5.2% from its intraday high of $114,000, although daily losses were around 0.8% at the time of writing, according to data from Coinbase.
While Bitcoin spot exchange-traded funds (ETFs) also saw inflows of $142 million yesterday, the broader crypto market momentum sank into “extreme fear,” with the Crypto Fear & Greed Index falling to levels not seen since December 2022.
Related: Bitcoin-gold correlation rises as BTC follows gold’s path to store of value
Gold’s current volatility came weeks after Deutsche Bank macro strategist Marion Laboure noted a number of parallels between gold and Bitcoin, which could make the crypto asset an attractive store of value.
Deutsche Bank analysts also highlighted that, despite parabolically reaching new highs in dollars, gold only surpassed its adjusted all-time highs in real terms in early October.
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