Bitcoin vs Gold: Which Will Be the Top Hedge in 2025?

This article explores the distinct roles of gold and bitcoin in investment portfolios, particularly in 2025, as highlighted by André Dragosch from Bitwise Asset Management. Gold remains a reliable hedge against falling stock markets, while bitcoin serves as a counterbalance during bond market stress, providing insight into how investors can strategise their asset allocations for optimal risk management.

Last updated: 19 October 2023 (BST)

Key Takeaways

• Gold is typically considered a safe haven during stock market downturns.
• Bitcoin has shown resilience during periods of bond market stress.
• Both assets can complement each other in a diversified portfolio.
• Performance in 2025 illustrates their diverging roles amid economic fluctuations.
• Investors may benefit from holding both gold and bitcoin for better risk-adjusted returns.

The Historical Context of Gold and Bitcoin

The investment landscape has long been shaped by asset behaviour during various economic climates. Gold has historically been viewed as a stable store of value, especially in times of market stress. Its performance during equity downturns is well-documented, with historical data showing a near-zero correlation with the S&P 500. This characteristic reinforces gold's status as a traditional “safe haven” asset.

Gold's Resilience During Stock Market Sell-offs

When equities face declines, investors tend to flock to gold as a protective measure. This trend has been consistently observed over decades. For instance, during the bear market of 2022, gold prices rose by approximately 5% even as the S&P 500 plummeted nearly 20%. Such evidence underscores gold's enduring appeal as a hedge against stock market volatility.

Bitcoin's Role as a Hedge Against Bond Market Stress

In contrast, bitcoin’s performance during stock sell-offs has been less robust. For example, in 2022, it experienced a significant decline of over 60%, paralleling drops in tech stocks. However, its relationship with U.S. Treasury bonds presents an intriguing narrative. Research indicates that bitcoin often exhibits a low or even negative correlation with government bonds.

Correlation with U.S. Treasuries

This dynamic suggests that when bond prices fall and yields rise—scenarios that have unfolded in 2023 amid concerns about U.S. debt—bitcoin may hold its ground more effectively than gold. André Dragosch highlights that these differing behaviours imply distinct roles for each asset in an investor's portfolio: gold as a safeguard against stock market losses and bitcoin as a buffer during periods of bond market tension.

2025 Performance Insights

As of August 31, 2025, the performance of both assets reflects their respective roles amid shifting economic conditions. Gold has surged over 30% year-to-date, driven by renewed demand during moments of equity volatility, influenced by geopolitical tensions and economic uncertainties. Conversely, bitcoin has gained approximately 15%, a noteworthy achievement considering the backdrop of fluctuating Treasury yields, which have fallen by around 7.33% this year.

Diverging Performance Trends

The contrasting trajectories of gold and bitcoin in 2025 align with Dragosch's assessment: while gold has capitalised on investor jitters linked to equities, bitcoin has maintained its resilience in the face of bond market instability. The S&P 500 has recorded a gain of roughly 10% during the same timeframe, further emphasising the unique roles of these assets.

Research Backing the Divergence

Dragosch's views are not merely anecdotal; they are supported by comprehensive research conducted by Bitwise. The findings suggest that gold continues to serve as a dependable hedge against stock market downturns, while bitcoin has demonstrated stronger performance during market recoveries and maintains a lower correlation with U.S. Treasuries. Holding both assets, therefore, could enhance portfolio diversification and optimise risk-adjusted returns for investors.

The Caveats of Correlation

While the historical correlations provide valuable insights, they are not static. In 2025, bitcoin's increasing correlation with equities has been influenced by substantial inflows into spot exchange-traded funds (ETFs), which have attracted billions from institutional investors. This shift is causing bitcoin to behave more like a mainstream risk asset, potentially diminishing its effectiveness as a bond hedge.

Impact of Market Shocks

Short-term market shocks can also distort the established correlation patterns. Unexpected regulatory changes, liquidity issues, or macroeconomic shocks have the potential to affect both gold and bitcoin simultaneously, which could limit their utility as hedging instruments. Thus, while Dragosch's heuristic offers a useful framework, it is essential to recognise that market conditions may alter the expected outcomes.

Is Gold Losing Its Appeal?

The question arises: with the Trump administration's vocal support for cryptocurrencies, is it time for investors to consider abandoning gold in favour of bitcoin? Dragosch's evidence-based stance is clear: gold retains its status as the superior asset during stock market declines, while bitcoin may provide shelter when bond markets face pressure. For investors, the lesson is not to choose one asset over the other, but to understand that each serves as a hedge against different economic risks.

Conclusion: A Balanced Approach

In summary, both gold and bitcoin hold unique roles within an investment portfolio. Their distinct behaviours in response to various market conditions suggest that a balanced approach could be the most prudent strategy. Investors should consider the strengths of each asset carefully and aim to utilise both to achieve a more resilient investment strategy in the face of uncertainty.

FAQs

What role does gold play in an investment portfolio?

Gold is primarily used as a hedge against stock market volatility, often increasing in value when equities decline, thus providing a safeguard for investors.

How does bitcoin perform during bond market stress?

Bitcoin often demonstrates resilience during bond market pressures, occasionally maintaining its value better than gold when U.S. Treasury yields rise.

Can gold and bitcoin be held together in a portfolio?

Yes, holding both assets can improve diversification and help optimise risk-adjusted returns, as they serve different hedging purposes.

What are the risks associated with investing in gold and bitcoin?

Gold may experience price fluctuations based on economic conditions, while bitcoin is subject to higher volatility and regulatory risks, impacting its effectiveness as a hedge.

Is gold still a relevant hedge in 2025?

Yes, gold continues to be a relevant hedge against stock market downturns, as evidenced by its performance in 2025 amid equity volatility.