5 Minutes
Two different hedges for two different risks
As investors re-evaluate risk in 2025, the debate over whether bitcoin can supplant gold as a primary hedge is heating up. Bitwise’s European head of research, André Dragosch, frames the discussion around a simple but important distinction: gold tends to protect portfolios during equity sell-offs, while bitcoin has demonstrated stronger resilience when U.S. government bond markets experience stress. That split matters for portfolio construction as stock volatility, higher yields, and shifting policy stances tilt how market participants allocate capital.
Why gold still serves as the classic safe-haven
Historical performance in equity downturns
Gold’s longstanding reputation as a safe-haven is rooted in multi-decade data. Over long periods, gold’s correlation with the S&P 500 has hovered near zero and often turns negative during market drawdowns. For example, when equities plunged during the 2022 bear market, gold rose roughly 5% while the S&P 500 fell nearly 20%. That ability to outpace losses when stocks tumble helps explain why institutional portfolios still include gold in their hedging toolkit.
How gold behaved in 2025
Through late August 2025, gold has surged more than 30% year-to-date, according to World Gold Council figures. That gain reflects renewed inflows as investors sought refuge during episodic equity volatility tied to trade frictions, slowing growth indicators, and heightened geopolitical and political risk.
Bitcoin as a hedge against bond-market stress
A different correlation profile
Bitcoin’s historical behavior has been more nuanced. While BTC frequently falls during periods of intense equity panic — for instance, the dramatic collapse in 2022 when tech stocks also crumbled — its relationship with U.S. Treasuries has at times been inverse. Research and market studies indicate bitcoin has exhibited low to slightly negative correlation with government bonds. That pattern means BTC has sometimes outperformed during episodes when bond prices sank and yields spiked, such as the treasury sell-offs driven by fiscal concerns.
Bitcoin’s 2025 performance and ETF flows
Bitcoin has returned roughly 15–17% year-to-date in 2025 (CoinDesk Data), a respectable showing given the backdrop of volatile treasury yields and persistent macro uncertainty. Yet the landscape is evolving: substantial inflows into spot bitcoin ETFs this year have brought large institutional pools into the market, making BTC behave more like a mainstream risk asset and strengthening its correlation with equities at times.
What Bitwise’s perspective means for investors
Dragosch’s rule-of-thumb is practical: don’t treat gold and bitcoin as interchangeable substitutes. Gold remains the superior shock absorber when equities decline, while bitcoin can act as a counterweight when bond markets are under pressure from rising yields or heavy government borrowing. In other words, both assets can play complementary roles in a diversified portfolio rather than serving as direct replacements for one another.
Evidence from research and diversification benefits
Bitwise’s research echoes these conclusions, noting that gold historically provides more reliable protection during stock market downturns, whereas bitcoin has sometimes delivered stronger returns during recoveries and displayed lower correlation with U.S. Treasuries. Their analysis suggests that holding both assets can improve risk-adjusted returns, smoothing portfolio volatility across different macro regimes.
Important caveats and risks
Correlations change and short-term noise can be misleading
Correlations are not static. The recent institutionalization of bitcoin via spot ETFs can reduce its “purity” as a bond hedge and increase co-movement with equities. Short-term shocks — regulatory announcements, liquidity squeezes, or major macro surprises — can send both gold and bitcoin moving in the same direction, temporarily eroding their hedging usefulness. Dragosch’s guideline is a probabilistic framework, not a guarantee.
Policy and political forces
The Trump administration’s openly pro-crypto stance has added another dimension to the debate. Political tailwinds can affect investor sentiment and capital flows into digital assets, bolstering bitcoin’s institutional adoption. But political support alone does not change the fundamental differences between gold and bitcoin as hedges against stocks versus bonds.
Practical takeaway for portfolio managers and investors
For investors seeking robust hedging strategies in 2025, the data-driven takeaway is to avoid binary choices. Gold continues to offer reliable protection against equity market drawdowns, while bitcoin can provide diversification benefits when bond markets are strained by rising yields or fiscal stress. Combining both assets—calibrated to an investor’s risk tolerance, horizon, and portfolio constraints—can improve diversification, lower drawdowns, and enhance risk-adjusted returns across a variety of macro scenarios.
Ultimately, the smarter play for long-term investors is not to abandon gold in favor of bitcoin or vice versa, but to recognize the distinct hedging roles each asset can serve and to position allocations accordingly.
Source: coindesk
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