Bitcoin is managing a liquidity challenge that gold has not faced.

QCP’s Darius Sit states that the deleveraging event in October revealed a significant divide: bitcoin functions as collateral, while altcoins behave like speculative bets on exchange governance

Key Points:

• According to Darius Sit from QCP Capital, bitcoin’s recent underperformance compared to gold is attributed to liquidity issues and position adjustments, rather than a failure of its long-standing role as an inflation hedge.
• The deleveraging shock on October 10 highlighted significant disparities in liquidity and credit risk between bitcoin and altcoins, which diminished confidence in exchanges that implemented socialized losses during the downturn.
• While bitcoin and ether experienced significant recoveries from liquidation-induced sell-offs, gold and major Asian equity indices, including Japan’s Nikkei 225, faced declines amid a broader risk-averse trend.

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The question of whether bitcoin is losing ground to gold has been raised in the market. Darius Sit, co-founder and Managing Partner at QCP Capital, suggests that this discussion is often centered on price, while the realities of liquidity hold greater importance.

QCP, based in Singapore, ranks among the largest trading desks in Asia, with an annual volume exceeding $60 billion.

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“When comparing Bitcoin to gold, it’s not an equivalent comparison… it’s akin to a mouse versus an elephant kind of analogy,” Sit remarked to CoinDesk. “There are distinct sets of unique market forces influencing market prices in the short term, but over the long term, I believe they remain quite similar.”

The dominance of gold is a reflection of sovereign demand, established market structures, and significant scale. Bitcoin’s underperformance is more related to position adjustments than a collapse of its fundamental thesis. The vast market capitalization of gold allows for daily fluctuations that can surpass bitcoin’s entire valuation, turning short-term differences into a physics issue rather than a narrative judgment.

Nonetheless, “over the long term, the narrative appears consistent,” Sit stated.

A more critical inflection point, according to him, is not gold’s rise but the crypto deleveraging event on October 10 (referred to as 10/10). This incident established a clear distinction between bitcoin and the rest of the digital asset ecosystem, revealing how liquidity and credit risks diverge once leverage is removed.

“October 10 demonstrated that … there is a very distinct line regarding liquidity between crypto, altcoins, and bitcoin,” Sit noted. The conclusion isn’t that cryptocurrency has lost its allure, but that many in the market realized its true depth only after forced unwinds cleared the books. What remained was a thinner environment where prices can shift sharply in either direction.

One of the critical lessons from “10/10” was the manner in which crypto platforms manage credit during crises.

Sit highlighted a notable contrast with traditional markets, where layered broker and clearinghouse frameworks mitigate shocks before losses are passed to end users.

In contrast, native crypto exchanges frequently function as single points of failure, depending on shareholder equity, insurance funds, and, in severe scenarios, socialized losses.

“Once socialized loss is triggered, your platform will lose trust,” Sit commented, describing what he sees as the industry’s genuine institutional barrier. Volatility is not the main issue. The challenge arises when traders cannot foresee how liquidations and counterparty risks will be handled in a stress situation.

Socialized loss occurs when an exchange’s insurance fund fails to cover bankrupt positions, compelling the platform to liquidate profitable traders’ positions to compensate for the deficit, effectively requiring winners to cover others’ losses. This situation unfolded on many major exchanges during the market downturn on October 10.

He further noted that participants perceived the rules as inconsistent, with some products or counterparties seeming insulated while others bore the brunt of the losses.

This perception endures longer than the price decline itself. Markets can rebuild leverage and trading volume, but regaining trust in liquidation governance takes more time.

The outcome is a divided environment where bitcoin maintains credibility due to greater liquidity and its clearer function as collateral, while the wider altcoin market trades at a structural discount influenced more by exchange design and counterparty confidence than by macro trends alone.

In Sit’s perspective, bitcoin continues to act as a long-term inflation hedge and an increasingly understandable type of collateral, whereas the broader altcoin market is more directly impacted by exchange governance and order-book depth rather than solely macro narratives.

“When an asset has poor liquidity, it can experience significant declines. It can also increase substantially,” Sit stated.

Market Movement

BTC: Bitcoin experienced significant volatility but rose approximately 5% in the last hour following a liquidation-driven drop towards $60,000, with the RSI around 17 indicating historically oversold conditions that often precede sharp relief rallies, even as the price remains near the $58,000 to $60,000 support level.

ETH: Ether traded at around $1,895, recovering about 7% in the past hour after a liquidation-induced sell-off, with volatility escalating as deeply oversold momentum conditions triggered a short-term relief rally despite double-digit losses over the preceding 24 hours.

Gold: Gold declined about 3.7% to approximately $4,740 per ounce amid a widespread pullback in risk assets and profit-taking, though analysts contend that the long-term upward trend is bolstered by ongoing central bank purchases, concerns over debt and currency confidence, and forecasts that still anticipate prices could approach $7,000 by 2026, despite short-term volatility.

Nikkei 225: The Nikkei 225 fell about 1%, extending a three-day losing streak as a sell-off in Wall Street tech stocks spilled over into Asia, dragging South Korea’s Kospi down by as much as 5%, impacting Hong Kong and Australian equities, and reinforcing a broader risk-averse sentiment that also affected silver and other volatile assets.

Elsewhere in Crypto

• U.S. Treasury’s Bessent criticizes crypto ‘nihilists’ opposing market structure legislation (CoinDesk)
• Tom Lee’s Bitmine now $8 billion in the red as ether falls below $2,000 (CoinDesk)