Professor Andrew Urquhart is Professor of Finance and Financial Technology and Head of the Department of Finance at Birmingham Business School (BBS).
This is the seventh installment of the Professor Coin column, in which I bring important insights from published academic literature on cryptocurrencies to the Decrypt readership. In this article, I study the relationship between Bitcoin and gold, and explore whether Bitcoin can replace gold.
For centuries, gold has been the ultimate store of value—used by civilizations as currency, collateral, and insurance against economic crises. But in the past decade, a new contender has emerged: Bitcoin.
Often referred to as “digital gold,” Bitcoin has been touted by enthusiasts as a modern, decentralized alternative to precious metals. But how valid is this comparison? Can Bitcoin truly replace gold as a store of value in the long term? Recent academic research offers valuable insights.
The case for Bitcoin as digital gold
One of the most cited arguments for Bitcoin’s role as “digital gold” is its scarcity and decentralization. Like gold, Bitcoin is finite—its supply is capped at 21 million coins. Unlike fiat currency, which can be printed by central banks, Bitcoin’s issuance is fixed and transparent. Its supply algorithm is enforced by a global network of miners, not a central authority.
A key paper in this space by Baur et al (2018) investigates Bitcoin’s behavior relative to gold. They find that Bitcoin exhibits properties inconsistent with traditional safe-haven assets. Unlike gold, which retains value in times of crisis, Bitcoin tends to behave more like a speculative asset—moving with investor sentiment and broader market trends.
Still, others argue that Bitcoin’s maturing market structure could eventually make it behave more like gold. As Bitcoin adoption expands and volatility falls, it may play a larger role as a portfolio diversifier. This argument is strengthened by recent work from Xu and Kinkyo (2023) who show that Bitcoin is a better short-term hedge against risk than gold, especially during COVID-19 and the Russian-Ukraine war.
Volatility: a sticking point
One of the biggest criticisms of Bitcoin as a gold substitute is its volatility. Unlike gold, which has historically exhibited low price swings, Bitcoin can fluctuate dramatically in short time frames. For instance, in 2025 alone, Bitcoin’s price ranged from under $76,000 to over $111,000—hardly the kind of consistency desired in a safe-haven asset.
Academic work by Klein et al (2018) reinforces this concern. Their empirical analysis finds that Bitcoin’s volatility is significantly higher than gold’s, and its correlations with traditional assets are unstable over time. They conclude that Bitcoin should not yet be considered a substitute for gold in risk-averse portfolios.
Interestingly, the paper also notes that Bitcoin may offer higher upside potential, making it appealing to speculative investors rather than conservative savers. This distinction underlines a key point: Bitcoin and gold may serve fundamentally different investor types.
Inflation hedge? The jury’s still out
A major role of gold historically has been as a hedge against inflation. In times of currency debasement, wars, or monetary easing, gold tends to retain or even increase in value. Can Bitcoin do the same?
The inflation-hedging properties of Bitcoin are explored by Dyhrberg (2016), who uses GARCH models to compare the volatility clustering of Bitcoin with that of gold and the US dollar. She finds that Bitcoin exhibits some hedging capabilities similar to gold and may be positioned “in between” a currency and a commodity. However, the study also cautions that Bitcoin’s short trading history and nascent infrastructure limit its reliability in this role.
More recent work by Bouri et al (2020) analyzes how Bitcoin performs during different inflation regimes and finds inconsistent evidence of hedging properties. While Bitcoin may act as an inflation hedge during some periods, it also responds strongly to risk appetite, investor behavior, and media hype—factors not typically associated with gold.
Institutional adoption and changing correlations
As institutions begin adding Bitcoin to their balance sheets or ETFs, many academics have explored whether Bitcoin’s correlations with other financial assets are shifting, possibly making it more “gold-like” over time.
Corbet et al (2019) suggest that Bitcoin’s behavior is not static—it evolves as market structure matures. They show that during periods of media-driven hype, Bitcoin decouples from traditional markets, but during financial panics, it tends to correlate more with equities—unlike gold, which tends to move inversely to stocks.
This implies that for Bitcoin to truly replace gold, it must not only maintain low correlation with risk assets but also demonstrate reliability across crises—something it has yet to consistently achieve.
Conclusion: Complement, not substitute—yet
So, can Bitcoin replace gold? Based on current academic evidence, the answer is not yet—and perhaps not entirely. While Bitcoin shares certain traits with gold—scarcity, decentralization, and increasing recognition—it lacks the historical track record, stability, and crisis-tested resilience that gold possesses.
However, given the rise of not only institutional interest, but institutional ownership of Bitcoin, some argue now is the financialization of Bitcoin. Further, as regulatory frameworks develop, market infrastructure matures, and volatility (perhaps) declines, Bitcoin could evolve into a more gold-like asset.
For more information, see:
Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of Exchange or Speculative Assets? Journal of International Financial Markets, Institutions and Money, 54, 177–189.
Xu, L., Kinkyo, T. (2023). Hedging effectiveness of bitcoin and gold: Evidence from G7 stock markets. Journal of International Financial Markets, Institutions and Money, 85, 101764.
Corbet, S., Lucey, B., Urquhart, A., Yarovaya, L. (2019). Cryptocurrencies as a
financial asset: A systematic analysis. International Review of Financial Analysis, 62, 192-199.
Klein, T., Pham, T. Q., & Walther, T. (2018). Bitcoin is not the New Gold – A comparison of volatility, correlation, and portfolio performance, International Review of Financial Analysis, 59, 105–116.
Dyhrberg, A. H. (2016). Bitcoin, gold and the dollar – A GARCH volatility analysis, Finance Research Letters, 16, 85–92.
Bouri, E., Jain, A., Roubaud, D., & Kristoufek, L. (2020). Cryptocurrencies as hedge and safe haven: New evidence from a multivariate quantile analysis, Journal of International Financial Markets, Institutions and Money, 67, 101190.
