TBW - The Kevin Warsh effect: when the Fed rattles gold and Bitcoin
The past week has been marked by an exceptional upsurge in volatility on all commodity markets, whether physical or digital. The figures illustrate the brutality of the movement: realised volatility for silver almost doubled in less than a month, rising from 65.72 on 5 January to 111.16 on 29 January. Gold has not been spared, with its volatility index jumping from the 25 zone to 46.
Precious metals: a massive erasure of value
After a sustained rally since the start of the year, the precious metals compartment (silver, gold, palladium) has begun a particularly severe reversion to the mean ("mean reversion").
In the space of ten days, silver has corrected by 32.72% from its all-time high, wiping out around $2.5 trillion in capitalisation (equivalent to the total value of the crypto ecosystem). Gold, for its part, gave up 16%, representing a loss of paper value of $6,620 billion.
This capitulation calls into question at a time when the macroeconomic fundamentals remained, in theory, buoyant: inflationary fears, global de-dollarisation, geopolitical tensions around Greenland or threats of escalation in Iran.
But two factors got the better of us:
- Massive profit-taking after a phase of parabolic rise.
- The 1.58% rebound in the DXY (dollar index) following the appointment of Kevin Warsh as head of the Federal Reserve. Warsh, who is known for his "hawkish" monetary profile, hints at a tougher-than-expected anti-inflation policy. The market was anticipating the appointment of a "dove" candidate, who would have been more inclined to cut rates quickly.
Historically, this type of correction in precious metals (with silver generally falling before gold) has often preceded major US recessions, such as in 1974, 1980 and 2008.
Crypto-assets: a purge through leverage
The digital assets market suffered a similar shockwave last Saturday. Bitcoin gave up 10.28%, Ethereum 17.09%, while altcoins (TOTAL3 index) were down 14.29%.
This fall can be explained by a cocktail of three technical and macroeconomic factors:
- A massive liquidation of long positions (estimated at $2.4 billion) on an order book with limited liquidity. The Hyperliquid, Binance and Bybit platforms were the main drivers of this cascade of liquidations.
- An outflow from ETFs: net outflows reached $1.827 billion in just forty-eight hours.
- The inverse correlation with the dollar, whose counter-trend rally weighed on risk assets.
Perspectives: a market in search of a second wind
Analysis of volumes highlights the current loss of steam. Transactional activity fell from $2,230 billion last October to just $1,200 billion in January.
Contrary to the euphoric phases, the current market seems to be settling into a "non-euphoric" bear market dynamic. The SOPR ratio (an on-chain market indicator that measures the degree to which investors profit or lose over a given period) indicates that long-term holders are continuing to extract liquidity (more than $4 billion since 1 January).
In the absence of new speculative capital, held back by difficult economic conditions for retail investors, the crypto-asset market is likely to remain, in the short term, under pressure.
