Gold and silver prices plunge: Short-term correction or peak? Will funds flow into the crypto market?

Key conclusions

Gold and silver are in a healthy correction and have not yet peaked . Fundamental supply gaps and industrial demand support a long-term upward trend. Technically, they are oversold but the trend has not been broken. A 10-20% correction is expected before the upward trend resumes.

Funds are unlikely to flow into the crypto market on a large scale in the short term - the continued outflow of BTC ETFs, extreme fear in market sentiment, and high leverage risk constitute a triple obstacle, but the fact that BTC valuation has entered an undervalued range lays the groundwork for potential rotation.

Gold and silver plunge analysis

Pullback Facts and Magnitude

According to market data, silver broke through $117/ounce to reach a record high on January 27th, before falling back to around $105 , a pullback of approximately 10.3%. Gold also saw profit-taking after breaking through $5000/ounce . ODAILY

Strong fundamental support

Supply-side rigid constraints :

• The global silver market has experienced a supply deficit for five consecutive years, with a cumulative deficit of 820 million ounces from 2021 to 2025, equivalent to the annual production.
• Silver inventories have bottomed out: London Bullion Market Association deliverable stocks stand at only 155 million ounces.
• Capacity constraints: New mine projects have a cycle of 8-12 years, and it is unlikely that new supply will be available before 2030.

Structural growth in industrial demand :

• Industrial demand for silver reached a record high of 680.5 million ounces in 2024, accounting for more than 60% of total demand.
• The largest single buyer in the photovoltaic industry: Each solar panel requires a silver paste conductive layer.
• Electric vehicles use 25-50 grams of silver per vehicle (traditional vehicles use 15-28 grams).
• Demand for AI and data centers will accelerate starting in 2024.

Technically oversold but the trend remains intact

Although no data was returned for specific technical indicators, the historical data shows:

• A typical pullback in a precious metals bull market is 10-20%.
• The current pullback is a healthy technical correction and has not damaged the long-term upward trend.
• Silver lending rates surged from the normal 0.3%-0.5% to 8% , indicating that the tight spot market situation remains unchanged.

Callback triggering factors

1. FOMC hawkish expectations : The Fed will keep interest rates unchanged at 3.50-3.75%, and expectations of a rate cut will not materialize.
2. Profit-taking pressure : Gold naturally pulled back after breaking through the psychological level of $5,000.
3. Exchange Risk Control : Major exchanges raise margin requirements to curb speculation .

Analysis of the Current Status of the Crypto Market

Significant pressure from capital outflow

ETFs continue to experience net outflows :

• BTC spot ETFs saw net outflows of over $1 billion in the past week.
• Fund Flow Comparison: In the first three weeks of January, precious metals ETFs saw a net inflow of $4 billion , while crypto ETFs experienced a net outflow.

Market sentiment is extremely pessimistic :

• The Fear & Greed Index fell to 15 (extreme fear), the lowest level since January.
• Social sentiment is pessimistic: Discussions focus on "gold and silver have peaked" and "crypto panic" (Coinglass )

BTC on-chain valuation enters undervalued range

Valuation metrics indicate an opportunity :

• MVRV: 1.51 - in the "fair valuation" range (historical average 2.0)
• NVT: 24.4 - Indicates "underestimation" (above 40 indicates overestimation).
• NUPL: 0.34 - Remains "optimistic" but close to neutral.
• SOPR: 0.99 - close to "surrender" level, indicating selling pressure release. CryptoQuant

Achieving price support :

• The BTC price (average cost basis) is at $55,954 , providing strong support.

Technically, it is severely oversold.

Overselling across multiple timeframes :

• 1-hour RSI: 20.6 (Deeply oversold)
• 4-hour RSI: 22.8 (Oversold)
• 1-day RSI: 29.8 (close to oversold)

Trend indicators for a bear market :

• The MACD is negative across all timeframes, indicating bearish momentum.
• The price has touched the lower Bollinger Band, indicating severe short-term overselling.

The derivatives market is high-risk

Concentrated leverage risk :

• Open interest: $116.9 billion (high leverage environment)
• 24-hour liquidation: $769 million , with long positions accounting for 97%.
• Long/Short Liquidation Ratio: 31.95 (Extremely unbalanced, long positions are under pressure) Coinglass

Funding rates are neutral : the average funding rate is 0.1437%, indicating a neutral sentiment in the derivatives market.

Assessment of the likelihood of fund rotation

Factors hindering the flow of funds to crypto

1. Extreme pessimism : The Fear & Greed Index is at 15, indicating extreme fear and a strong risk aversion among investors.
2. Lack of profit-making opportunities : The crypto market has been weak since October 2025, while precious metals have performed strongly.
3. Structural outflows : Continuous net outflows from ETFs indicate that institutional funds are still withdrawing.
4. Leverage risk : High open interest + pressure from long liquidation creates a negative feedback loop.

Potential rotation opportunities

1. Valuation Advantage : BTC on-chain metrics indicate it has entered an undervalued range, and the NVT ratio of 24.4 is attractive.
2. Technically oversold : RSI across multiple timeframes is oversold, increasing the probability of a technical rebound.
3. Gold and silver price correction triggers capital outflow : If gold and silver prices fall by 10-20%, some speculative funds may seek new opportunities.
4. Extreme sentiment : A fear index of 15 is close to historical extremes, often corresponding to significant market bottoms.

Risk Warning

Gold and silver risks :

• If the Federal Reserve is more hawkish than expected, precious metals could see a pullback of more than 20%.
• Industrial demand for silver paste reduction: Photovoltaic companies are already reducing the amount of silver paste used per solar panel.

Cryptographic risks :

• If the key support level of $84,000 for BTC is breached, it could potentially fall to $80,600 or even $75,200.
• Risk of liquidation chain reaction under high leverage environment
• Geopolitical uncertainty continues to weigh on risk assets

Investment advice

Short term (1-4 weeks) :

• A 10-15% pullback in gold and silver presents a healthy buying opportunity; pay close attention to the $105-95 support zone for silver.
• The crypto market is largely on the sidelines, waiting for BTC to break through $88,000 before considering entry.

Mid-term (1-3 months) :

• Gold and silver are supported by strong fundamentals, and there is a high probability of new highs after a pullback.
• The crypto market needs to observe signs of fund rotation, with a focus on whether ETF outflows have reversed.

Key signal monitoring :

• Gold and Silver: Pay attention to the effectiveness of the $100 support level for silver and the $4800 support level for gold.
• Crypto: Can BTC hold $84,000? Will ETF fund flows shift?
• Macro: Fed policy signals, geopolitical developments

Data sources: ODAILY, CryptoQuant, Coinglass, TAAPI; data as of January 30, 2026 UTC.