If you’re searching for a unified, Occam’s razor-friendly theory to explain gold’s meteoric rise over the past three years, Bitcoin’s recent failure to keep up and, even more recently, an escalating wipeout across the crypto-sphere, you’re in luck.

On a day when Bitcoin’s multi-month melt pushed “digital gold” below $66,000 at the lows, down almost 50% from the October peak, Nomura’s Charlie McElligott set about elaborating on his contention that there’s a conceptual link to what some have described as an existential moment for software businesses.

In the same note, he wondered if, in our zeal to explain everything by way of Donald Trump’s peculiarities, we might be missing the bigger picture as it relates to actual (i.e., non-digital) gold.

On the latter point, Charlie said that although he’s on board with the notion that diversification away from the dollar makes sense given pervasive concerns around fiscal profligacy and debasement, and in the context of what I do think it’s fair to call seismic geopolitical shifts, the reality is that when “you look at the liquidity of your alternatives” as a real money asset allocator, there aren’t any. Alternatives, I mean.

“You’re just loaded into massive size in USD assets, and that’s extremely difficult to slosh around,” he wrote. And besides, FX reserve managers, SWFs, pensions and endowments aren’t exactly famous for being fleet of foot when it comes to this sort of wholesale allocation rethink.

Even if they were motivated, brave and nimble, is gold really fit for that purpose? “It’s costly to store and move” and it doesn’t yield anything, McElligott said. “It’s just not totally clear to me [that] debasement [worries] are creating this massive and widespread rebalancing into gold from real money entities [beyond] a percentage point here and there.”

So what is it, then? What’s behind the surge? Two words which, by now, are synonymous: Xi and China.

There (in the charts) is your gold rally. In the bottom two panes just as much as the top.

That China’s a buyer isn’t a new observation, but as noted above, the Xi factor tends to be trumped (pun fully intended) in the discourse these days by explanations which reference the mercurial machinations of the only person more powerful than the Chinese leader.

When it comes to gold, McElligott thinks the China point gets short shrift. Beijing, he wrote Thursday, “saw itself being ostracized from the Western order in recent years, and after what the US and its allies did with regard to [freezing] Russia’s assets, the Chinese simply made a decision to begin protecting themselves from USD ‘weaponization’ risk via gold purchases, custody and repatriation.”

The accompanying rally was a magnet which eventually pulled in anyone and everyone as the allure of meme stock-like returns on a safe haven was simply too much to resist — and as precious metals’ momentum demanded the attention of trend-following models. Throw in an incremental bid tied to Trump’s theatrics and you have the largest multi-year gold rally on record.

What about Bitcoin? Well, it has no role in that narrative. It’s illegal in China, and I dare say Xi would sooner be beholden to the whims of the US Treasury than he would tie up China’s figurative and literal fortunes in a glorified spreadsheet.

Although you can always make the argument that Bitcoin’s offered superior returns over the course of its short life (if you measure from October of 2011 to the highs in October of 2025, Bitcoin was up something like 1,100,000%), it’s worth noting, as Bloomberg did Thursday, that with this week’s drop, Bitcoin trailed gold and the S&P Total Return Index on a five-year lookback.

As for the impetus of Bitcoin’s snowballing selloff, McElligott drew a parallel with the crisis in software stocks. “Bitcoin is digital, not physical,” he wrote, adding that although that “sounds hilariously obvious,” people don’t seem to be making the connection they should based on that (almost tautological) observation.

The charts above are as simple as charts get. On the top is the Bitcoin ETF and on the bottom the software ETF. They’re both down. A lot.

“Think about the similarities between software and Bitcoin,” Charlie exhorted. “There’s i) a digital output, ii) an inherent scarcity angle / firewall cost to interact with propriety output / API, iii) a need for compute / electricity to release value, iv) a per-seat subscription to access said value / subscription to access the ledger.”

Crypto and SaaS, he went on, are “the same digital trade in a world that wants real assets.”

I buy it. I’d say the market does too, but that’d feel like a misnomer given the demonstrable lack of “buying” in Bitcoin and software names.