Something interesting has been happening in the gold market lately. Although geopolitical tensions in the Middle East have been escalating since February, gold prices have actually fallen about 10% since the war started. This is contrary to the traditional narrative of gold as a safe haven. Even more extreme, gold has dropped nearly 20% from its all-time high in January, approaching a technical bearish condition.

The cause is relatively clear: expectations of persistently high interest rates. The market is now repricing the prospects of rate cuts, with most cuts delayed until December 2026. Additionally, the rise in oil prices triggered by geopolitical risks is adding inflationary pressure, reinforcing a prolonged high-interest-rate environment. This combination has become a major obstacle for gold.

Now, from the perspective of M2 or the global money supply, which includes cash and deposits, gold is actually trading at a very high level historically. It is close to the peaks of 1974 when gold was $200 per ounce and 2011 when it was $1,800 per ounce. This provides an interesting picture of how the form of money then differs from now. The much larger global liquidity today requires adjustments in gold valuation to understand its true position. Gold seems to be forming a base cycle relative to broader global liquidity.

Bitcoin is taking a different path. Relative to M2, Bitcoin is still in a consolidation phase similar to 2024, and remains about 40% below its October peak. Based on liquidity adjustments, this is a typical consolidation range before the next cycle rally. Historically, each Bitcoin cycle moves beyond previous peaks when adjusted for the circulating money supply.

From a market perspective, there has been a significant change in correlation dynamics. Gold and Bitcoin have started moving in sync tick-by-tick since gold dropped from $5,000 on Wednesday, indicating a positive correlation element after previously moving differently from the crypto market. This could be an indicator that both assets are beginning to respond to macro liquidity dynamics in a similar way.

Meanwhile, there is also an interesting story on the Ethereum side. Companies that previously focused on mining have quickly transformed into Ethereum treasuries with leverage, doubling their shares in six months and raising over 1928374656574839.25T to accumulate nearly 5% of all Ether. They now hold 4.87 million Ether with an average cost of $2,206 per token. Crypto treasury strategies are becoming a trend among institutional companies.