Gold vs Bitcoin: Which is the Better Hedge?

Bitcoin is often called ‘digital gold’ because of its scarcity and role as a potential hedge against inflation. In 2025, gold surged to record highs above $3,500 per oz and bitcoin climbed past $120,000, leaving many investors wondering – which is the better hedge?

In this guide, we explore how gold and bitcoin act as hedging instruments, including the similarities and differences between the two.

What is a hedge in investment?

In investment, a hedge is a strategy designed to manage risk. Investors hedge their investments by taking a position in another asset that’s likely to move in the opposite direction. This can help reduce potential losses (but can also limit potential gains).

You can think of hedging as being like an insurance policy. For example, a homeowner who lives in a flood-prone area can’t completely eliminate the risk of flooding, but they can reduce the financial impact of a potential flood by buying flood insurance. It’s the same with investments, only investors hedge by holding assets that can help offset potential losses in their main investments.

For example, if an investor buys shares in a high-growth tech company, they might also purchase shares in a defensive sector like consumer staples. If the tech stock falls, the defensive holding might help cushion the blow.

There are many tools used for hedging, including:

• Diversification: Pairing riskier assets with defensive ones, such as gold or government bonds
• Derivatives: Using options, futures, or other derivatives that move in the opposite direction of the main investment
• Alternative vehicles: Hedge funds use more complex strategies to manage risk across market cycles.

The role of gold as an inflation hedge

Gold has a reputation of being a reliable hedge against inflation, helping protect purchasing power even as currency values decline. In fact, data from the World Gold Council suggests that an ounce of gold today buys roughly the same amount of goods as it did over 100 years ago.

There are a few reasons why gold works as a hedge against inflation:

• It maintains its value over the long term, even while paper currencies decline in value
• It operates outside of central bank or government monetary policy
• It’s globally recognized as a store of value
• It moves differently than stocks and bonds, providing balance during periods of market stress.

When inflation rises, traditional assets like stocks and bonds tend to decline. Investors turn to gold as a safe haven, increasing demand and pushing its prices up higher.

We’ve seen this happen numerous times throughout history. For example, the U.S. in the 1970s was facing heavy inflation driven by rising oil prices and increased government spending. During this time, the dollar lost significant value while gold surged from around $35 per ounce to $850 per ounce by 1980 – all while stock prices fell. It happened again in the post-2008 financial crisis, when concerns about currency stability fueled another rally. Between 2008 and 2011, gold soared from $800 per ounce to more than $1,900 per ounce.

Overall, the data shows that gold prices increased during six of the eight largest stock market crashes since the late 1970s. This makes it a proven hedge during economic instability.

Learn More: Exploring the Role of Gold as an Effective Hedge Against Inflation

The role of bitcoin as an inflation hedge

Bitcoin is often considered a hedge against inflation, mainly because it has a fixed supply of 21 million coins. This scarcity works similarly to gold in helping protect against eroding purchasing power.

There are several reasons why bitcoin is seen as an inflation hedge:

• It has a limited supply, so its value can’t be diluted by printing more
• It’s decentralized, meaning it operates independently of governments and central banks
• It can be used across borders, unlike fiat currencies, making it a global store of value
• It’s easy to transport and verify, giving it certain advantages over gold or real estate.

Despite its hedging features, bitcoin is a highly volatile cryptocurrency. Its price often moves alongside risk assets like tech stocks, making it more of a risk-on asset rather than a defensive one. During the 2022 equity market selloff, for example, bitcoin fell by more than 60%, which suggests its vulnerability to broader market downturns. In 2025, geopolitical uncertainties and tariff threats from the U.S. put pressure on both equities and bitcoin, which means it may not always be a consistent hedge.

That said, research shows that bitcoin can appreciate in response to inflation shocks. Studies using Vector Autoregression (VAR) models confirm that bitcoin often rises when inflation expectations increase. Unlike gold, however, it tends to decline during periods of financial uncertainty.

Investing in gold vs bitcoin as an inflation hedge

There are many similarities between gold and bitcoin: both have limited supply, attract demand that’s independent of the economic cycle, and have become more widely adopted through exchange-traded funds (ETFs). Beyond these similarities, however, they also have many differences.

Gold is a natural asset that has been valued by civilizations across the globe for thousands of years. It has served as money and a store of value, and today it’s still widely held by central banks in their reserves. Bitcoin, on the other hand, is a digital innovation that’s only been around since 2008. Even though it has strong potential, its history is short and we’ve yet to see how it performs in different economic conditions.

See: Is There a Correlation Between the US Dollar and Gold Prices?

Similarities between gold & bitcoin as inflation hedges

Let’s look at some of the similarities between the two assets.

Limited supply

Both gold and bitcoin are scarce assets, but their scarcity works differently:

• Gold’s supply constraints are geological. These days, large discoveries are extremely rare, ore grades are declining, and production costs are increasing. Over the last decade, the average cost of mining gold has increased from around $1,000 to about $1,400 per ounce.
• Bitcoin’s scarcity is purely technical. Its code limits supply to 21 million coins and mining rewards are halved roughly every four years. Mining bitcoin uses substantial computing power, and as more miners compete, the network self-adjusts to make the cryptocurrency even harder to mine. At scale, you could even compare the energy needed to solve a bitcoin cryptographic puzzle to the energy required to extract gold.

Demand from investors

Both gold and bitcoin tend to move separately from the business cycle, with demand depending mostly on investor confidence, portfolio strategies, and perceptions of safety or opportunity. Both assets tend to rise during periods of economic turbulence, when investors lose trust in traditional assets.

In 2025, for example, bitcoin reached new highs amidst growing distrust in financial systems – the same environment that historically drove gold to record levels during crises.

Gold vs bitcoin hedging characteristics

Now let’s look at gold and bitcoin’s hedging characteristics:

• Systemic risks in financial markets: Both gold and bitcoin are designed to act as safe havens during systemic stress. Gold has a proven history of acting this way, while bitcoin is still mostly untested in severe crises. In theory, however, its decentralization and security make it attractive in these situations.
• Dedollarization: With rising U.S. deficits and geopolitical tensions, there have been concerns about relying on the U.S. dollar as a global reserve currency. Both gold and bitcoin are considered ‘anti-dollars’ that can hedge against the erosion of U.S. dollar dominance.
• Inflation: Gold and bitcoin both hedge against ‘bad inflation’ caused by reckless fiscal and monetary policies, but not necessarily against ‘good inflation’ that comes from healthy growth and is managed by central banks. Again, gold has a long track record of rising during periods of high inflation, while bitcoin has yet to prove its role.
• Equity market corrections: Gold is a classic risk-off asset that tends to rise when equities fall. Bitcoin, on the other hand, behaves as a risk-on asset that often moves in line with equities. This exposes it to sharp downside risks during market corrections.

What are the differences between gold and bitcoin?

We’ve covered a lot of the similarities between gold and bitcoin, including their limited supply and independence from the monetary system. Now let’s look at what makes the two assets different.

Gold is physical while bitcoin is digital

Gold is a tangible asset with benefits that can’t be matched with paper gold or digital investments like bitcoin. This includes:

• No counterparty risk during times of financial system stress
• Complete privacy
• Protection from digital financial controls
• Independence from technological vulnerabilities.

On the other hand, bitcoin exists entirely in digital form. Its ownership relies on cryptographic keys and blockchain technology, which can be both beneficial (e.g. borderless transfer and decentralization) and risky (e.g. cybersecurity risks, dependence on digital infrastructure). If the internet is ever down, or electricity infrastructure destroyed, you won’t be able to access your store of wealth.

Read More: Everything You Need to Know About Gold ETFs

Gold is stable while bitcoin is volatile

Gold has a long history of stability. Its price tends to rise during economic or geopolitical crises and inflationary periods, but it has held its value for hundreds of years. Bitcoin, however, is highly volatile and has experienced price swings of more than 60% in a single year.

Gold is a risk-off asset while bitcoin is risk-on

Gold is a risk-off asset, which means it attracts investors when they’re feeling fearful, currencies are weakening, or equity markets are falling. Bitcoin behaves more like a risk-on asset, since it often rises with tech stocks and falls when markets tighten. This can make it less reliable as a defensive holding during economic downturns.

Gold is a proven hedge, bitcoin is still unproven

Gold has a proven track record of acting as a store of value when other assets fall, from the 1970s to 2008 and beyond. It has been valued for thousands of years, so it’s unlikely to go anywhere.

Bitcoin, on the other hand, is just over 15 years old. While it may eventually prove itself as a long-term hedge against inflation and currency devaluation, it’s yet to be tested through multiple economic cycles. For now, that means it’s less reliable as a proven hedge.

Should you invest in gold, bitcoin, or both?

At the end of the day, gold and bitcoin have different characteristics and hedge against different risks. The smartest move might not be to choose one or the other, but to use both.

Gold is the classic safe haven, with history showing that investors turn to the metal during equity sell-offs. Its long-term correlation with the S&P 500 hovers near zero and often turns negative during periods of market stress. For example, in the 2022 bear market, gold prices rose by around 5% while the S&P 500 fell nearly 20%.

Bitcoin has yet to prove itself during equity panics. In 2022, for example, it fell by more than 60% along with technology stocks. But studies show that bitcoin has exhibited a low or even negative correlation with U.S. Treasuries. In 2023, for example, when fears over U.S. debt pushed yields higher and bond prices lower, bitcoin sometimes held up better than gold.

Research by Bitwise confirms that gold and bitcoin have complementary roles, with gold remaining the more reliable hedge against stock market downturns and bitcoin tending to deliver stronger returns during recoveries. There’s no need to pick one over the other – holding both assets can improve diversification and strengthen your hedge.

Buy gold as an inflation hedge

For investors, the ultimate takeaway is clear: bitcoin might offer diversification and growth potential, but gold remains the most reliable hedge against inflation and economic instability. If you’d like to diversify your portfolio with a proven store of value, there’s no better way to do it than by investing in physical gold bullion bars and coins.

At StoneX Bullion, we offer a wide selection of investment-grade gold bullion in various sizes, ideal for both beginner investors and those looking to build substantial holdings. Browse our collection and start safeguarding your wealth with the enduring value of gold today.