Store of value attributes
Gold has long served as a reliable store of value. People have turned to it for wealth preservation and as a medium of exchange for millennia. But what exactly makes gold so valuable?
- Its Scarcity and Limited Supply: Unlike currencies that can be printed at will, gold must be from the earth. All the Gold ever extracted would fit into a 22x22 metre cube. Its annual supply growth is limited to about 2–3%, making it one of the most scarce and hard assets on earth.
- Its Durability: Gold doesn’t corrode, tarnish, or decay. It can last for centuries without losing its form, as evidenced by artifacts dating back to 4,500 BC.
- Its Universal Recognizability and Trust: Across cultures and history, gold has been recognized and accepted. Its appearance, weight, and purity standards make it easy to verify and trust. Today, it remains widely held, with an estimated 45% of all gold stored in the form of jewellery.
- Its Divisibility and Portability: Gold can be divided into smaller units like or bars and carried relatively easily, without losing value. Although large amounts can become heavy and costly to transport.
- It has No Counterparty Risk: Holding gold means no reliance on a third party. Unlike bonds or bank deposits, its value doesn’t depend on someone else’s promise to pay.
Gold's scarcity, resilience, and independence from any central authority have made it humanity’s go-to store of value for centuries. So how does stack up in these same areas?
- Scarcity and Limited Supply: has a fixed supply of 21 million . Following its 2024 , where the number of new per was divided by two, its annual issuance rate dropped to approximately 0.85%. This gives a stock-to-flow ratio (this ratio shows how hard it is to add new supply, higher means rarer) nearly double that of gold, making it, by that model, more scarce.
- Durability: is intangible and cannot corrode or degrade over time. It is a digital asset made up of code and data. As long as there is internet access and at least one operating, the network can continue to function and maintain the integrity of its .
- Recognizability and Trust: is relatively new, having been created in 2009. Since then, it has grown to over a million active and continues to gain global recognition. Institutional adoption is also rising. , for example, have achieved one of the fastest adoption rates in history. Yet many people don’t trust and dismiss it entirely, often due to a lack of understanding.
- Divisibility and Portability: can be divided down to 0.00000001 , making microtransactions possible. It can be sent across the globe within minutes, with no need for physical transportation or intermediaries, just an internet connection.
- No Counterparty Risk: Like Gold, is a bearer asset. Ownership doesn't depend on a third party. The primary risks lie in access, such as internet availability, or custody issues like lost .
does share similar attributes with Gold. Fundamentally, it is more scarce than Gold, and easier to divide and transport. Yet, its durability has yet to be proven and trust is still being earned. A key difference is speculative nature, based on network effects and belief in its future utility, versus gold's intrinsic value from industrial uses (e.g., electronics, jewellery) and historical significance. So how have these two assets protected investors against inflation and shock events in recent history?
How assets respond to inflation surges
The inflationary period of the 1970s provides a valuable historical benchmark for assessing how Gold acted as a store of value, and how we might expect it and to perform under similar economic pressures. Between 1964 and 1984, year-over-year (YoY) inflation in the US rose from modest levels of around 1% in 1964 to double digits by the late 1970s, driven by oil shocks and loose monetary policy. A key turning point came in 1971 with the end of the Bretton Woods Agreement, which allowed currencies to float freely for the first time, officially detaching them from gold backing. Therefore, 1970s period are relevant comparison point for today's similarly inflationary and currency-debased environment.
Inflation rose cyclically during the period from 1965 to 1989, exhibiting three distinct phases, each peaking in 1969, 1974, and 1980, with prices rising reaching approximately 6%, 12%, and 14%, respectively. During these inflationary surges, Gold acted as a fantastic store of value, closely tracking and often outperforming the YoY inflation pace.
- The data show gold returns mirroring closely inflation’s ups and downs, with YoY gains of 22.64% in 1969, 100.3% in 1974, and 188.04% in 1980.
- The higher the inflation, the greater gold’s YoY returns tended to be, showing a proportional response.
- Interestingly, Gold often acted as a leading indicator, topping out prior to or concurrently with inflation peaks.
Let’s now examine how both Gold and have performed since 2020. We’re focusing on this period because, prior to 2020, was still an emerging asset, making earlier comparisons less meaningful or reliable.
Since 2020, Gold’s YoY returns have broken from their 1970s pattern, no longer rising with inflation but often moving inversely. It peaked at +39.8% in July 2020, two months after inflation hit a low, and bottomed in October 2022, four months after inflation peaked, highlighting a reversal from its historical role as a perfect inflation hedge.
, by contrast, has loosely tracked inflation with much higher volatility. It bottomed in June 2020, one month after inflation’s low, and soared to +815% YoY by March 2021,15 months before inflation’s 2022 peak. While some alignment exists, its timing has been inconsistent.
Since late 2022, gold and have moved more in sync: by December 2024, Gold was up 27% YoY and 120%. Today, Gold has climbed to 44% while has slowed to 67%, suggesting fading crypto momentum and strengthening gold performance.
Viewed against the 1970s benchmark, neither asset has consistently hedged inflation in this cycle. Gold has delivered strong gains, but out of sync with inflation’s timing; continues to swing between correlation and decoupling. Whether inflation enters another cyclical phase, and how these assets respond, remains to be seen.
How assets react to economic shock events
Due to its strong store-of-value properties, Gold is seen as a safe-haven asset that investors turn to during times of turmoil. In this section, we’ll explore how both Gold and performed during recent geopolitical and economic shock events.
During these geopolitical events, both Gold and have shown the potential to act as hedges. While both assets showed defensive qualities, their performance diverged significantly in consistency and volatility.
Gold demonstrated steady and reliable returns, especially over longer timeframes:
- Gold posted positive 7-day returns in all five events.
- Over 90 days, it remained positive in four out of five cases, reinforcing its role as a traditional safe haven.
- Its only negative 90-day return was a modest -2.95% during the Russian Invasion.
delivered higher average returns but with greater instability:
- In the short term, showed strong upside.
- It posted massive 90-day gains during Covid and in the Israel-Hamas conflict but also saw sharp declines after the Russian Invasion.
In short, Gold consistently delivered positive returns across most timeframes and outperformed in three of the five major events. , while often outperforming in average return driven by a few outsized surges, carried greater downside risk and exhibited less dependable behaviour. Gold offered more consistent and stable protection.
Tracking the Bitcoin–Gold correlation
If is to serve as a modern counterpart to Gold, a strong and stable correlation coefficient between the two assets would be expected. A correlation close to 1 indicates the assets move in tandem, while a correlation near 0 means they move independently.
- Over a one-year window, the correlation between and gold sits at just 0.05, with values ranging from 0.09 to 0.32, indicating a weak but consistently positive long-term relationship.
- On shorter time frames, the correlation becomes more volatile and cyclical. The 3-month correlation fluctuates between -0.28 and 0.51, with an average near 0.1.
- The 1-month correlation is the most unstable, ranging from –0.75 to 0.66, reflecting erratic short-term co-movements.
In practice, ’s correlation with gold has remained weak and inconsistent, rarely exceeding 0.3 over sustained periods. This suggest that while occasionally aligns with Gold, it does not function as a strong or reliable proxy over time.
When plotting the one-year correlation between Gold and against inflation, an inverse relationship becomes apparent since 2020. The correlation between the two assets tends to increase during periods of low inflation and decrease during times of high inflation. Yet, as stated earlier, the correlation remains relatively low overall, mostly below 0.3, which suggests that and Gold have not consistently moved together in a strong way over time. In fact, for most of the period, correlation hovers around 0.1– 0.2.
Assessing volatility in Bitcoin and Gold
A store-of-value asset should have low volatility to preserve purchasing power over time. After all, people don’t keep cash under a mattress expecting it to rise or fall, they do it because they expect it to stay stable. So, let’s see how stable Gold and have been:
This charts the rolling annualized volatility (i.e. how much prices moves in a year) for Gold, and for Gold in the 1970s. More specifically Gold starting August 1972, exactly one year of volatility when the dollar became de-pegged from Gold, letting the true value of Gold, expressed in dollars, fluctuate freely. It is interesting to note that:
- 1-year annualized volatility started over 80% in 2019, declining to around 50% by June 2025.
- Gold 1972's 1-year annualized volatility peaked over 50%, making it as volatile as is today.
- Gold 1-year annualized volatility remained stable at an average of 17%, being substantially lower than in 1970.
While is almost 3 times more volatile than Gold by today’s standards, it is interesting to note that not only is its volatility consistently decreasing year on year, but that today's volatility matches Gold's volatility in the 1970s.
Conclusion
While shares some of the qualitative traits that have made Gold humanity’s longest-standing and most battle-tested store of value, it fundamentally differs in important ways. By its digital nature, can never replicate Gold’s physical utility, particularly in jewellery and industrial applications like electronics. That said, does offer potential advantages in certain aspects. It can be sent across the world within minutes and internet connection at a very low cost.
’s role as an inflation hedge is still to be proven, although Gold itself has experienced volatility during inflationary periods this decade. ’s performance during market shocks has been inconsistent, yet it has occasionally produced outsized returns, giving it strong average performance. Its low correlation with Gold also makes it an appealing potential diversifier within a broader portfolio. Importantly, ’s volatility has been on a gradual decline, a promising long-term trend.
In conclusion, while there is some merit in comparing with Gold. ’s current inconsistency and relatively high volatility mean it cannot yet be considered a better or equivalent store of value, at least in terms of protection against inflation and economic or geopolitical shock events. If trust, global recognition, price stability, and consistent performance in turbulent markets increase over time, achieved through decades of maturation, the argument may grow stronger. For now, however, remains too young and unproven to fully support such a claim.
