Bitcoin or gold: which one should you choose?

The question has been on people’s minds for some time. Should we choose between Bitcoin or gold? Although gold is less volatile than bitcoin, it will not be a true positive hedge (positive real return) against inflation in 2022. The real question remains which will be best against fiat currency. This is where we touch on the topic.

Popular “hedge” against inflation

2022 was mainly marked by inflation. And unfortunately, contrary to the official narrative, neither bitcoin nor gold has hedged against it in terms of positive real returns. Of course, since gold is a less volatile asset than bitcoin, it lost less than bitcoin over the entire year.

However, it was more the US dollar and commodities that hedged better than inflation for part of the year. When a central bank is “hawkish”, i.e. sufficiently restrictive in its monetary policy, it is often favorable to the local currency. As the Fed continues its restrictive policy through 2022, the US dollar has benefited.

Inflation of the 1970s

In the 1970s, gold was the preferred hedge against inflation. More precisely, in the period of stagflation. A stagflation situation highlights economic slowdown and high unemployment. The context of that time was different from today. Growing demographics fueled inflation, and debt was not as high at the time as it is today. With the onset of inflation, the demand for gold was high. As a result, this led to some action by then-President Richard Nixon. He finished the gold standard It consists of converting the US dollar into gold.

However, inflation in 2022 is driven by different elements than in the 1970s, notably liquidity injections, geopolitical issues, but also supply-side issues. The debt situation is not the same because it is higher and population growth is more problematic. That’s why items that performed well in the 70s during inflation were slightly different in 2022.

However, gold performs quite well in an equally deflationary environment. Here is a chart highlighting the different environments and performance of gold.

fiat currency

The real question is whether to use gold or bitcoin as a hedge against fiat currency rather than inflation itself. The fact that central banks have been printing a lot of liquidity over the past few years has made the value of fiat currency worse.

Here is a graph showing the evolution of the value of the dollar over the years:

select bitcoin

As we mentioned above, we want to know if bitcoin can be a solution for hedging against the US dollar. So far, and on a long-term basis, bitcoin has clearly outperformed several currencies (fiat currencies). This can be seen clearly in the chart below against the US dollar:

Before choosing an asset, one can look at volatility, liquidity, utility, performance, intrinsic value…

bitcoin benchmarks


As we all know, bitcoin is quite a volatile asset and more so than gold or stock indices. It can be considered a high growth asset. Bitcoin’s performance can be very attractive, but large losses are part of the risk, which is the concept of risk versus reward. This is a measure that should be taken into account, for example, reductions.


Bitcoin is increasingly liquid. It can be bought and sold through trading platforms. But the still-developing cryptocurrency is also a place that can attract fraudsters. As the industry develops, certain regulatory and inspection measures are implemented. Regardless of the type of asset, you should always be aware of the risk.

On the other hand, liquidity is less extensive than gold because gold has been available for longer years.

Ultimately, the biggest risk is that we don’t have enough history to create stability like, say, gold.

Its usefulness

Along with technological developments such as the popularization of blockchain, bitcoin is also an asset that was created in conjunction with the quantitative easing program (money printing or QE) of 2008-2009. QE devalued fiat currency based on the principle of unlimited printing. Therefore, bitcoin with its limited supply of 21 million was a good counter to this.

Determining the intrinsic value of Bitcoin is difficult because it remains virtual, intangible, and does not generate cash flow. However, we can determine, for example, the initial production cost.

Performance/Adequate Environment

Bitcoin turns out to be a risky asset with its pros and cons. Therefore, performances can be high, but also losses. There is also an environment where Bitcoin is more affordable than others. Especially when there are factors such as monetary policy, growth, dollar, halving that affect it. When financial conditions tighten, bitcoin may lose more value than gold because it is more volatile.

choose gold

Gold is one of the oldest wealth. Its evolution over the years has shown a certain long-term monetary stability.


Gold is a less volatile asset than bitcoin because its capitalization is also higher. Therefore, gold depreciation is also less volatile. Some would say it remains a safe haven. It is true that during recessions we can see that it is much more stable than other assets. Double-digit declines are extremely rare during recessions.


Gold always has buyers and sellers, it is the oldest currency. It’s true that the physical version of holding gold may be more restrictive to resell or hold, but that doesn’t mean there will always be a market for gold. The alternative to the physical version remains the more liquid paper version, such as ETFs that track gold.

In terms of liquidity, gold still remains the most capitalized asset in history, 5 times higher than APPLE:

Source: companiesmarketcap

Its usefulness

In addition to being useful as an alternative currency with tangible value as a safe haven, gold can also be used in manufacturing, such as jewelry.

Since gold does not necessarily generate cash flow, we cannot estimate its intrinsic value. However, gold can be said to have material value in its physical state, its supply is limited by the difficulty of extraction, and it remains the oldest monetary unit.

It appears that gold remains a significant asset in the eyes of central banks as they accumulate large amounts of gold in their reserves (probably due to the ever-increasing debt).

Golden Performance

As we’ve seen before, gold outperforms bitcoin, especially during periods of risky volatility. This is also the case in 2022. Gold could have outperformed over the course of the year, but this was limited amid a strong US dollar appreciation. Moreover, if we look at gold against other currencies, especially currencies that will depreciate significantly in 2022, such as the Japanese yen, we will see that gold has maintained its role as a safe haven against fiat currency (almost 18%).

However, gold should potentially outperform in 2023 as US dollar appreciation is expected to moderate through 2023 and the environment remains volatile.

The result

Either way, the two assets have their advantages, especially in terms of limited supply to avoid an unlimited supply of fiat currency. However, bitcoin outperforms gold under certain conditions, such as accommodative monetary policy or accelerated growth. Its smaller capitalization compared to gold allows it to have more volatility. Conversely, gold, with its larger capitalization, offers better stability than bitcoin during periods of higher risk. The most important thing is not to denigrate one or the other and use the virtue of each depending on the environment.

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Laetitia Bonaventure avatar
Laetitia Bonaventure

After working for a Canadian bank for 7 years, including 5 years as an analyst in portfolio management, I left to devote myself entirely to financial markets. My goal here is to analyze financial market data in various aspects, including macro analysis, technical analysis, cross-market analysis…

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