Gold’s Low Volatility Keeps It Ahead of Bitcoin in the Market

- Josh Gilbert, Market Analyst at eToro

When markets turn gloomy, gold often shines. Investors call gold a “safe haven” because it tends to hold its value, or even increase, during uncertain or volatile periods. Gold has historically had a low or negative correlation with traditional assets like stocks and bonds. That means when stocks are falling, gold often outperforms, helping cushion portfolio losses. This diversification benefit is one of the key reasons why gold is often suggested as part of a balanced portfolio.

In recent years, a new contender has entered the scene: Bitcoin. Often dubbed “digital gold,” Bitcoin has attracted a following of investors who see it as the modern equivalent of gold—a store of value and hedge against fiat currency debasement. Both gold and Bitcoin share some similarities: neither is tied to a company's earnings or bond interest payments, and both have limited supplies (gold by nature, Bitcoin by code).

The first major difference between them is volatility. Gold has earned its safe-haven reputation over centuries, whereas Bitcoin is still arguably in its infancy and has behaved more like a high-risk asset throughout its history. If your primary aim is portfolio insurance and stability during crises, gold’s long history and lower volatility make it the more reliable choice. Bitcoin is more of a speculative diversifier; it might play a role in a portfolio, but it’s not a proven safe haven in the way gold is.

As institutional adoption grows and regulatory clarity improves, bitcoin and crypto are gradually alleviating their purely speculative image and growing toward mainstream acceptance as assets that deserve a place in investment portfolios.

This built-in scarcity underpins the idea that Bitcoin should hold its value when inflation erodes the purchasing power of dollars. Over the past decade, Bitcoin’s price appreciation has well outpaced

inflation. However, in 2022, when inflation in the U.S. and Europe hit decade highs, bitcoin’s price fell 65% for the year, even as gold stayed roughly flat. At the same time, bitcoin has also outperformed gold, but not without its ups and downs, which aren’t for the faint-hearted.

Some younger investors with a high-risk tolerance and long-time horizon might favour Bitcoin or high-growth stocks as their “alternative” asset and skip gold entirely. In my experience, the question of gold in a portfolio often comes down to this: Does it help you stay disciplined and calm? If knowing you have a bit of gold helps you not panic-sell your stocks in a downturn because you see something in your portfolio holding value, then gold is doing its job.

For now, investors see it bitcoin as a long-term store of value, not a safe haven. Bitcoin is a promising but still maturing asset, and a small allocation has proven that it can increase gains in a portfolio, but with a high level of volatility. However, it still falls short of the consistency that traditional hedges like gold offer.