According to World Gold Council (WGC) analysts, the first cryptocurrency cannot claim the title of digital gold.
The massive stock market crash at the beginning of August, which many compared to Black Monday in 1987, forced investors to revise their portfolios. Market participants also analyzed their assets for resilience in extreme market conditions. Against this backdrop, traders started using cryptocurrencies, particularly Bitcoin, as a "hedge against inflation" or as a means of preserving capital. However, officials of the World Gold Council disagree with this notion.
The WGC emphasizes that some market players call Bitcoin “digital gold,” but this is incorrect. It is no wonder that many researchers challenge this statement and conclude it is false.
The organization studied the dynamics of various fundamental asset classes over the past 10 years. Thus, experts demonstrate why Bitcoin cannot be considered "the new gold." The main obstacle in this regard is its volatility. For example, the average daily volatility of gold over the past five years has been less than 20%, while for Bitcoin, it is 60%. In 2024, the weekly volatility of both assets reached 13.83% and 53.62%, respectively.
"Simply put, gold and bitcoin sit at the opposite ends of the volatility spectrum. On a five-year rolling basis, the data shows a rather clear picture: gold is less volatile," the WGC notes.
Notably, gold has been a safe-haven asset for decades, trusted by central banks.
As for the first cryptocurrency, WGC experts consider it an indicator of the application of blockchain technology rather than a means of capital preservation. Moreover, BTC's dynamics resemble those of tech stocks, which also show high volatility.
The organization also compared the correlation between the two assets and concluded that Bitcoin and gold are influenced by different factors.
"In times of increased stress in market conditions, gold provides a unique impact on a diversified portfolio. Looking at data both year to date and averaging over the past five years, gold’s performance provides positive correlation in up markets, and negative correlation in down markets," the analysts added.
The WGC highlights the increasing role of gold as a safe-haven asset since the beginning of the Russia-Ukraine conflict. This confirms that gold is globally recognized as a means of protecting investors from risks.
The experts also compared the precious metal and BTC in terms of their returns, considering the level of risk associated with these investments. The organization modeled the influence of adding gold to a portfolio with an allocation from 2.5% to 10% and concluded that gold reduces volatility and improves returns. However, the situation with Bitcoin is the opposite—the larger its share in the portfolio, the higher the risk.
"It is critical to remember that to truly be a safe haven asset, the right kind of performance during significant market drawdowns is key. What you can find is that once established, bitcoin has not demonstrated the same characteristics as gold at those critical moments. When you expect protection against significant market moves, bitcoin tracked risk assets," the experts summarize.
According to the specialists, adding gold to an investment portfolio "provides demonstrated diversification, while bitcoin doesn’t offer any genuine diversification: the addition of bitcoin is the same as increasing exposure to high-risk equities."
The organization stressed that gold and Bitcoin are different assets with unique characteristics and investment risks. While Bitcoin offers certain advantages in portfolio diversification, these investments are not equivalent to investing in gold and will not replace the precious metal.