The Data Proving Bitcoin Outperforms Gold Despite Volatility

Bitcoin’s risk-adjusted performance continues to stand out against gold, even amid periods of extreme volatility. This has raised questions about the traditional role of gold in investment portfolios.

Year-to-date, gold has risen 39% compared to Bitcoin’s 19%, but historical cycles suggest that BTC may deliver far superior performance when accounting for risk.

Bitcoin’s Risk-Reward Profile

During the 2017 bull market, Bitcoin surged roughly 1,300%, and produced a Sharpe ratio of 1.4 despite extreme price swings, while gold’s 13% gain over the same period yielded a Sharpe ratio of just 0.8. Similarly, in the 2020 cycle, Bitcoin climbed 214% in the second half of the year, versus 7% for gold. BTC’s Sortino ratio exceeded 3.0 in that period and indicated its ability to generate outsized gains relative to negative price movements.

Gold, by comparison, maintains more consistent but lower risk-adjusted returns, according to the latest findings shared by Michael Nadeau of ‘The DeFi Report.’. Gold’s Sharpe ratio typically hovers between 0.6 and 0.9 in a given year, reflecting stability but limited upside. Sortino ratios for gold rarely exceed 1.5, which means that while downside protection is strong, returns per unit of negative volatility are modest compared with Bitcoin.

The crypto, on the other hand, demonstrates that high volatility does not necessarily penalize investors when downside movements are measured separately. Across multiple bull cycles, Bitcoin’s asymmetric volatility has translated into significantly higher risk-adjusted returns, even as its raw price swings can exceed 80% in a single year.

Nadeau noted that these metrics are particularly relevant for performance-focused investors. While gold continues to provide capital preservation and hedging benefits, which is beneficial in bear markets or inflationary periods, Bitcoin’s combination of high upside, global liquidity, 24/7 market access, and strong Sortino ratios positions it as a potentially more efficient vehicle for wealth accumulation.

For those willing to tolerate volatility, BTC’s risk-adjusted profile suggests that it can outperform traditional hard assets like gold, not just in raw returns but in returns relative to the risk undertaken.

“In our opinion, if you’re looking for outperformance and can weather some volatility, BTC is the superior asset. If the primary goal is capital preservation, gold certainly has a role to play.”

Demographics: On Gold vs Bitcoin

It does not come as a surprise that Millennials and Gen-Z increasingly favor Bitcoin over gold. Nadeau said that younger investors are drawn to BTC’s asymmetric upside, 21-million supply cap, portability, divisibility, and transparent ledger, which offer global liquidity and ease of use.

Baby Boomers, on the other hand, continue to value gold for capital preservation and inflation hedging.