Professor Andrew Urquhart is Professor of Finance and Monetary Expertise and Head of the Division of Finance at Birmingham Enterprise College (BBS).
That is the seventh installment of the Professor Coin column, during which I carry necessary insights from revealed tutorial literature on cryptocurrencies to the Decrypt readership. On this article, I research the connection between Bitcoin and gold, and discover whether or not Bitcoin can exchange gold.
For hundreds of years, gold has been the final word retailer of worth—utilized by civilizations as foreign money, collateral, and insurance coverage towards financial crises. However previously decade, a brand new contender has emerged: Bitcoin.
Also known as “digital gold,” Bitcoin has been touted by fanatics as a contemporary, decentralized various to treasured metals. However how legitimate is that this comparability? Can Bitcoin really exchange gold as a retailer of worth in the long run? Current tutorial analysis gives worthwhile insights.
The case for Bitcoin as digital gold
One of the cited arguments for Bitcoin’s function as “digital gold” is its shortage and decentralization. Like gold, Bitcoin is finite—its provide is capped at 21 million cash. Not like fiat foreign money, which will be printed by central banks, Bitcoin’s issuance is mounted and clear. Its provide algorithm is enforced by a world community of miners, not a government.
A key paper on this house by Baur et al (2018) investigates Bitcoin’s habits relative to gold. They discover that Bitcoin reveals properties inconsistent with conventional safe-haven property. Not like gold, which retains worth in instances of disaster, Bitcoin tends to behave extra like a speculative asset—transferring with investor sentiment and broader market traits.
Nonetheless, others argue that Bitcoin’s maturing market construction may finally make it behave extra like gold. As Bitcoin adoption expands and volatility falls, it could play a bigger function as a portfolio diversifier. This argument is strengthened by current work from Xu and Kinkyo (2023) who present that Bitcoin is a greater short-term hedge towards threat than gold, particularly throughout COVID-19 and the Russian-Ukraine struggle.
Volatility: a sticking level
One of many largest criticisms of Bitcoin as a gold substitute is its volatility. Not like gold, which has traditionally exhibited low value swings, Bitcoin can fluctuate dramatically briefly time frames. For example, in 2025 alone, Bitcoin’s value ranged from below $76,000 to over $111,000—hardly the form of consistency desired in a safe-haven asset.
Tutorial work by Klein et al (2018) reinforces this concern. Their empirical evaluation finds that Bitcoin’s volatility is considerably greater than gold’s, and its correlations with conventional property are unstable over time. They conclude that Bitcoin shouldn’t but be thought of an alternative to gold in risk-averse portfolios.
Curiously, the paper additionally notes that Bitcoin might provide greater upside potential, making it interesting to speculative buyers moderately than conservative savers. This distinction underlines a key level: Bitcoin and gold might serve essentially totally different investor sorts.
Inflation hedge? The jury’s nonetheless out
A serious function of gold traditionally has been as a hedge towards inflation. In instances of foreign money debasement, wars, or financial easing, gold tends to retain and even enhance in worth. Can Bitcoin do the identical?
The inflation-hedging properties of Bitcoin are explored by Dyhrberg (2016), who makes use of GARCH fashions to match the volatility clustering of Bitcoin with that of gold and the US greenback. She finds that Bitcoin reveals some hedging capabilities much like gold and could also be positioned “in between” a foreign money and a commodity. Nevertheless, the research additionally cautions that Bitcoin’s brief buying and selling historical past and nascent infrastructure restrict its reliability on this function.
Newer work by Bouri et al (2020) analyzes how Bitcoin performs throughout totally different inflation regimes and finds inconsistent proof of hedging properties. Whereas Bitcoin might act as an inflation hedge throughout some intervals, it additionally responds strongly to threat urge for food, investor habits, and media hype—components not sometimes related to gold.
Institutional adoption and altering correlations
As establishments start including Bitcoin to their stability sheets or ETFs, many lecturers have explored whether or not Bitcoin’s correlations with different monetary property are shifting, probably making it extra “gold-like” over time.
Corbet et al (2019) recommend that Bitcoin’s habits isn’t static—it evolves as market construction matures. They present that in intervals of media-driven hype, Bitcoin decouples from conventional markets, however throughout monetary panics, it tends to correlate extra with equities—not like gold, which tends to maneuver inversely to shares.
This suggests that for Bitcoin to actually exchange gold, it should not solely preserve low correlation with threat property but in addition show reliability throughout crises—one thing it has but to constantly obtain.
Conclusion: Complement, not substitute—but
So, can Bitcoin exchange gold? Based mostly on present tutorial proof, the reply isn’t but—and maybe not completely. Whereas Bitcoin shares sure traits with gold—shortage, decentralization, and growing recognition—it lacks the historic monitor report, stability, and crisis-tested resilience that gold possesses.
Nevertheless, given the rise of not solely institutional curiosity, however institutional possession of Bitcoin, some argue now’s the financialization of Bitcoin. Additional, as regulatory frameworks develop, market infrastructure matures, and volatility (maybe) declines, Bitcoin may evolve right into a extra gold-like asset.
For extra info, see:
Baur, D. G., Hong, Ok., & Lee, A. D. (2018). Bitcoin: Medium of Trade or Speculative Belongings? Journal of Worldwide Monetary Markets, Establishments and Cash, 54, 177–189.
Xu, L., Kinkyo, T. (2023). Hedging effectiveness of bitcoin and gold: Proof from G7 inventory markets. Journal of Worldwide Monetary Markets, Establishments and Cash, 85, 101764.
Corbet, S., Lucey, B., Urquhart, A., Yarovaya, L. (2019). Cryptocurrencies as a
monetary asset: A scientific evaluation. Worldwide Assessment of Monetary Evaluation, 62, 192-199.
Klein, T., Pham, T. Q., & Walther, T. (2018). Bitcoin isn’t the New Gold – A comparability of volatility, correlation, and portfolio efficiency, Worldwide Assessment of Monetary Evaluation, 59, 105–116.
Dyhrberg, A. H. (2016). Bitcoin, gold and the greenback – A GARCH volatility evaluation, Finance Analysis Letters, 16, 85–92.
Bouri, E., Jain, A., Roubaud, D., & Kristoufek, L. (2020). Cryptocurrencies as hedge and protected haven: New proof from a multivariate quantile evaluation, Journal of Worldwide Monetary Markets, Establishments and Cash, 67, 101190.
