Is Gold’s Reign as a Hedge Asset Ending?

As the Trump administration advocates for cryptocurrency, some investors are beginning to ponder whether gold’s status as the go-to hedge asset might be waning.

André Dragosch, the European research director at Bitwise Asset Management, points out that it’s not an easy decision. He recently shared his insights on social media, stating that gold remains the most effective safeguard against stock market downturns, while Bitcoin is increasingly viewed as a counterpart to bond market pressures.

Gold: A Tried-and-True Hedge

Looking at historical trends, when stock values drop, many investors turn to gold. Its long-term correlation with the S&P 500 has typically hovered around zero, often dipping into negative territory during market turmoil.

For instance, during the bear market of 2022, gold prices increased by about 5% even as the S&P 500 fell nearly 20%. This trend highlights why gold is still seen as a traditional “safe haven.”

Bitcoin: A Buffer Against Bond Market Stress

On the other hand, Bitcoin hasn’t fared well in times of stock market panic. In 2022, it plummeted over 60%, mirroring declines in high-tech stocks. However, its relationship with U.S. Treasury bonds is particularly noteworthy.

Research suggests that Bitcoin tends to have a low or slightly negative correlation with government bonds. This means that when bond prices drop and yields rise—like in 2023 due to concerns about U.S. debt—Bitcoin may perform better than gold.

Dragosch’s main takeaway is that investors don’t necessarily have to pick one over the other. They serve different purposes. Gold is a better hedge during periods of stock market instability, while Bitcoin could bolster a portfolio facing pressure from rising bond yields or financial concerns.

Looking Ahead to 2025

This year’s performance illustrates this divide.

As of August 31, gold saw an increase of over 30% since the year’s start, reflecting growing interest amid stock market volatility linked to tariffs and political uncertainty.

Meanwhile, Bitcoin has gained about 16.46% this year—decent, considering U.S. Treasury yields fell around 7.33% during this period.

In contrast, the S&P 500 rose by roughly 10% in 2025. This varying performance underscores Dragosch’s analysis. Gold reaped the benefits of stock market jitters, while Bitcoin has reacted more to shifts in the bond market.

Importantly, this isn’t just Dragosch’s personal perspective. Previous studies indicate that while gold remains a dependable hedge against stock declines, Bitcoin often delivers more impressive returns in recovery phases, indicating its lower correlation with U.S. Treasury bonds.

Overall, holding both could enhance diversification and optimize risk-adjusted returns.

A Note of Caution

However, correlations are not constant. In 2025, ties to stocks strengthened due to significant investments in spot ETFs, diverting billions into gold.

With a surge in spot Bitcoin ETF investments, the cryptocurrency has begun to behave more like a conventional risk asset, potentially diluting its role as a bond hedge.

Short-term market shocks can also complicate matters. Regulatory changes, liquidity issues, or broader economic impacts might cause both gold and Bitcoin to react similarly, which could limit their effectiveness as hedges. Essentially, Dragosch’s warnings serve as guidelines rather than guarantees.

Trump’s supportive stance on cryptocurrencies poses an intriguing issue: is it time to completely replace gold with Bitcoin? Dragosch says no. Gold still excels as a safeguard during stock declines, but Bitcoin could prove beneficial when the bond market is under strain. The lesson for investors isn’t to choose between the two, but to understand that they guard against different risks. Using both could be the most strategic approach.