Digital Gold: A Story Still Being Written

Crypto is Bleeding Billions a Year. Traditional Finance Is Watching.

September 10, 2025 Edited by Alexandra Levis Was this newsletter forwarded to you? Sign up here.  Hi readers,   In today's newsletter, Lionsoul Global's Gregory Mall writes that while bitcoin's correlation with gold has historically been weak, a recent uptick in long-term correlation suggests the "digital gold" narrative may be gaining traction, though it remains an evolving story as bitcoin continues to mature.   Then, Immunefi's Mitchell Amador writes that if the DeFi industry doesn't adopt the security tools we've already built, then we will watch institutional capital deploy elsewhere while hackers fund their operations with our losses. Thanks for joining us.   – Alexandra Levis From the Analyst Digital Gold: A Story Still Being Written   August put a small dent in what remains a longer-term uptrend for digital assets. Bitcoin fell about 6.5% — its first monthly decline since March — after briefly touching a new all-time high of $125,000 mid-month. Ether, by contrast, extended its strong run, gaining nearly 19% and lifting its share of overall market capitalization to roughly 13%. This rotation from bitcoin into ether was also visible in ETFs: bitcoin funds saw rare net outflows, suggesting some profit-taking after this year's extraordinary rally, while ether ETFs attracted heavy inflows that pushed assets under management to record levels. As a result,  bitcoin dominance slipped to its lowest point since January, leaving the overall market capitalization of digital assets roughly flat on the month.   Despite this sideways performance, market activity remained elevated. Spot trading volumes held above their twelve-month average — unusual for the typically quiet summer season — and derivatives markets were just as lively. Open interest in bitcoin and ether options reached new highs, and August set a record for BTC option trading volumes at $145 billion. Implied volatility stayed relatively subdued but did tick up toward month-end, hinting that the options market may be underestimating risk.   While bitcoin paused, gold was on a tear. A perfect storm of falling rate expectations, persistent core inflation, widening trade deficits, a weaker dollar, geopolitical risks and mounting political uncertainty propelled the yellow metal to successive record highs. The dismissal of Fed Governor Lisa Cook by the Trump administration further stirred concerns over the long-term independence of the Federal Reserve. Treasury yields hardly budged, but gold — as a traditional hedge against inflation and systemic risk — jumped sharply. Bitcoin, however, traded lower on the day the news broke.   This raises the perennial question of whether bitcoin truly deserves the label "digital gold." Its scarcity and libertarian origins support the analogy, but the data tells a more nuanced story. Short-term correlations between bitcoin and gold have been inconsistent, oscillating around 12% and 16% on both 30- and 90-day windows. Over longer horizons (180d), the average correlation is slightly higher, but still low. In other words, the two assets have not reliably moved together. However, since 2024, the average 180-day rolling correlation has shown a meaningful uptick to around 60%. The effect is visible on shorter horizons as well, though less pronounced. One reasonable interpretation is that the 'digital gold' narrative is beginning to gain firmer footing with investors as the asset class matures. It is also worth remembering that gold itself has an imperfect track record as a macro and inflation hedge. It does not track consumer prices month by month, though over decades it has preserved purchasing power better than most assets. Research also shows that gold can serve as a safe haven during episodes of extreme equity stress, but not always, as its mixed relationship with the VIX illustrates. For bitcoin, the narrative is still in flux. Some investors view it as a technology play; others see it as an emerging macro hedge. We believe the latter will prove more durable over time. Unlike other blockchains, Bitcoin's limited scalability, rigid governance and lack of Turing completeness mean it is unlikely to become a multi-application platform. Other protocols are far better suited to that role. Instead, bitcoin's long-term value proposition rests on its scarcity and neutrality— features that echo gold's monetary role.   Of course, such narratives take time to solidify. Gold required millennia to become widely accepted as a store of value. Bitcoin, by comparison, is only sixteen years old, yet it has already achieved remarkable levels of recognition and adoption. The "digital gold" analogy may not be fully supported by the data today, but it is far too early to dismiss it. If anything, history suggests that the story is still being written.   Legal Disclaimer   Information presented, displayed, or otherwise provided is for educational purposes only and should not be construed as investment, legal, or tax advice, or an offer to sell or a solicitation of an offer to buy any interests in a fund or other investment product. Access to the products and services of Lionsoul Global Advisors is subject to eligibility requirements and the definitive terms of documents between potential clients and Lionsoul Global Advisors, as they may be amended from time to time.   - Gregory Mall, CFA, FRM, chief investment officer, Lionsoul Global Institutional Outlook Crypto is Bleeding Billions a Year. Traditional Finance Is Watching. Crypto is superior to traditional finance. Unlike SWIFT, which can take days to process payments, newer blockchain networks achieve finality in mere seconds and have throughput sufficient for real-world mass adoption. U.S. Treasury Secretary Bessent projects stablecoins alone will hit $3.7 trillion by 2030. That's the equivalent of Germany's GDP.   Despite its technological edge, crypto has a major security problem. We're on track to lose around 4% of total value locked to hacks in 2025. In H1 alone, the industry lost over $2 billion. When annualized, that points to over $4 billion flowing into hackers' wallets this year.   If these losses were mirrored in traditional finance, the entire system would collapse. Yet crypto normalizes catastrophic loss rates while wondering why JPMorgan isn't moving their balance sheet on-chain.   Hacks cost more than you think   The real damage goes far beyond immediate theft. It's a burden on the whole ecosystem and it gets priced in. Hacked protocols suffer a median 52% token price decline over six months, with the majority still showing price suppression half a year later.   For an industry aspiring to manage the world's wealth, this is an existential problem. No traditional financial market could survive with annual theft rates approaching 4%. To unlock the institutional flood gates and bring the next trillion on-chain, we must drive hack rates below 1% – now.   The North Koreans are stalking your development team   The moment a crypto project announces funding, North Korean hackers begin social engineering attacks on development teams. They've gotten scary good at it. Look at the Radiant Capital hack – $50 million gone because attackers compromised devices through malware that infected transaction signing.   The most painful part of all of this is that we have the tools to stop this, and they keep getting better. AI-driven monitoring systems can spot and resolve critical security issues before code is deployed, catching vulnerabilities that humans miss. Auditing services connect projects with elite Web3 security researchers to deliver tailored security reports. We have the tools, yet projects still ship with single pre-launch audits and pray. Protocols set rewards to identify vulnerabilities at 1% of funds at risk when they should be at 10%. Moreover, they skip monitoring because it seems expensive until they're explaining to users why $50 million vanished.   How to make crypto ready for primetime   Reducing hack rates below 1% is an engineering challenge we already know how to solve. Protocols must embrace comprehensive security stacks: continuous monitoring, meaningfully priced security rewards to encourage security researchers, formal verification for critical components and AI-powered threat detection. The cost is trivial compared to the potential losses.   Banks and institutions see these hack rates. They run the math. And they conclude – correctly – that crypto isn't ready for prime time. DeFi survived every market crash with no systemic bad debt. We solved the technical problems. Security can't be an afterthought. Either we adopt the security tools we've already built, or we watch institutional capital deploy elsewhere while hackers fund their operations with our losses.   -  Mitchell Amador, CEO and founder, Immunefi Keep Reading  HashKey, the HK crypto exchange, promotes standardized approach to managing crypto assets: Crypto Exchange HashKey Plans $500M Digital Asset Treasury Fund First fully regulated venue in Europe to offer crypto derivatives is live: Backpack Opens Regulated Perpetuals Exchange in Europe After FTX EU Acquisition Stellar's native token XLM posted gains reflective of sustained institutional buying interest: Stellar's XLM Gains 2.3% as Institutional Buying Anchors Support at $0.36 As always, get the latest crypto news from coindesk.com and market updates from coindesk.com/indices. Crypto Long & Short: A newsletter from CoinDesk Were you forwarded this newsletter? 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