Professor Coin: Can Bitcoin Replace Gold?

Professor Andrew Urquhart is professor of finance and financial technology and head of the Finance department at Birmingham Business School (BBS).

This is the seventh episode of the Professor Coin column, in which I bring important insights from published academic literature on cryptocurrencies to the Decrypt Readers. In this article I study the relationship between Bitcoin and Gold and I investigate whether Bitcoin can replace gold.

For centuries gold is the ultimate value storage – used by civilizations such as currency, collateral and insurance against economic crises. But in the past decade a new competition has emerged: Bitcoin.

Often referred to as ‘digital gold’, Bitcoin has been recommended by enthusiasts as a modern, decentralized alternative to precious metals. But how valid is this comparison? Can Bitcoin Gold really replace it as a long -term store? Recent academic research offers valuable insights.

The case for Bitcoin as digital gold

One of the most cited arguments for the role of Bitcoin as “digital gold” is the scarcity and decentralization. Just like gold, Bitcoin is finite – the supply is choked with 21 million coins. In contrast to Fiat -Valuta, which can be printed by central banks, the issue of Bitcoin is fixed and transparent. The supply algorithm is enforced by a global network of miners, not a central authority.

An important article in this space through Baur et al (2018) Investments Bitcoin’s behavior in relation to gold. They believe that Bitcoin shows characteristics that are not consistent with traditional Safe-Havenactiva. In contrast to gold, which retains value in times of crisis, Bitcoin acts more as a speculatively active – moving with investor sentiment and wider market trends.

Yet others claim that the adult market structure of Bitcoin could ultimately make it worn more like gold. As the adoption of Bitcoin expands and the volatility drops, it can play a greater role as a diversifyer of a portfolio. This argument is reinforced by recent work of Xu and Kinkyo (2023) They show that Bitcoin is a better hedge in the short term against risk than gold, especially during COVID-19 and the Russian-Ukraine war.

Volatility: a bottleneck

One of the biggest criticism of Bitcoin as a gold replacement is the volatility. In contrast to gold, which has shown historically low price fluctuations, Bitcoin can fluctuate dramatically in short time frames. For example, in 2025, for example, the price of Bitcoin varied from less than $ 76,000 to more than $ 111,000 pleasure the type of consistency that was desired in a safe port active.

Academic work Klein et al (2018) Strengthens this concern. Their empirical analysis finds that the volatility of Bitcoin is considerably higher than that of Gold, and the correlations with traditional assets are unstable over time. They conclude that Bitcoin should not yet be considered a replacement for gold in risky portfolios.

Interestingly, the paper also notices that Bitcoin can offer a higher upward potential, making it attractive for speculative investors instead of conservative savers. This distinction underlines an important point: Bitcoin and gold can fundamentally serve different investor styles.

Inflation department? The jury is still out

An important role of gold is historically as a hedge against inflation. In times of currency debasement, wars or monetary relaxation, gold tends to retain or even increase it in value. Can Bitcoin do the same?

The inflation-hedging properties of Bitcoin are being investigated by Dyhrberg (2016)These Garch models uses to compare Bitcoin’s volatility clustering with that of gold and the US dollar. She believes that Bitcoin shows some hedging possibilities that are comparable to gold and can be positioned “between” a currency and a merchandise. However, the study also warns that Bitcoin’s short trade history and the emerging infrastructure limit its reliability in this role.

More recent work of Bouri et al (2020) Analyzes how Bitcoin performs during various inflation regimes and finds inconsistent proof of cover homes. Although Bitcoin can act an inflation hedge during some periods, it also responds strongly to the risk of appetite, investor behavior and media hype – factors that are not usually associated with gold.

Institutional adoption and changing correlations

As Bitcoin institutions begin to add to their balance sheets or ETFs, many academics have investigated whether the correlations of Bitcoin shift with other financial assets, making it possible over time.

Corbet et al (2019) Imagine that Bitcoin’s behavior is not static – it evolves as the market structure matures. They show that during periods of media-driven hype, Bitcoin disconnects from traditional markets, but during financial panic, it tends to correlate more with stock-in contrast to gold, which tends to go to shares.

This means that Bitcoin to really replace gold, not only has to maintain a low correlation with risk assets, but must also demonstrate reliability in crises – something that it still needs to achieve consistently.

Conclusion: complement, not replacing – Yet

So, can Bitcoin gold replace? Based on current academic evidence, the answer is not yet – and maybe not entirely. While Bitcoin shares certain properties with gold alcohol, decentralization and increasing recognition fog, the historic state of service, stability and resilience tested by crisis owns gold.

Given the rise of not only institutional interest, but the institutional ownership of Bitcoin, some now claim the financialization of Bitcoin. Furthermore, as regulatory frameworks develop, market infrastructure ripens and volatility (perhaps) falls, Bitcoin could evolve into a more golden active.

For more information, see:

Baur, DG, Hong, K., & Lee, AD (2018). Bitcoin: Medium or Exchange or Speculative Activa? Journal of International Financial Markets, Institutions and Money54, 177–189.

Xu, L., Kinkyo, T. (2023). Covering effectiveness of Bitcoin and Gold: evidence of G7 stock markets. Journal of International Financial Markets, Institutions and Money85, 101764.

Corbet, S., Lucey, B., Urquhart, A., Yarovaya, L. (2019). Cryptocurrencies as a

Financially active: a systematic analysis. International assessment of financial analysis62, 192-199.

Klein, T., Pham, TQ, & Walther, T. (2018). Bitcoin is not the new gold – a comparison of volatility, correlation and portfolio performance” International assessment of financial analysis59, 105–116.

Dyhrberg, AH (2016). Bitcoin, Gold and the Dollar – A Garch Volatility Analysis” Finance research letters16, 85–92.

Bouri, E., Jain, A., Roubaud, D., & Kristoufek, L. (2020). Cryptocurrencies as hedge and safe port: new proof of a multivariate quantile analysis” Journal of International Financial Markets, Institutions and Money67, 101190.