Crypto’s Hedge-Appeal Cracks as Gold Wins Big on Debasement Fear

For much of this year, Bitcoin had been asserting itself as a new kind of portfolio diversifier on Wall Street — a digital counterpart to gold for mainstream investors looking to hedge against fiscal excess, inflation and more.

Bitcoin exchange-traded funds were swelling with inflows, its price was setting records, and the idea that it could function as a modern store of value was edging closer to the financial mainstream.

Then came a reminder of how fragile that promise remains.

After last week’s violent selloff in digital assets, the same market that once symbolized independence from Wall Street looked ...