In early May 2023, Coindesk reported that, in the space of four months, Bitcoin’s correlation with the Nasdaq index had shrunk from 0.90 to almost zero. While admitting that the reasons for the phenomenon were unclear, Coindesk suggested that, since the digital token was responding to Fed monetary policy differently to traditional assets – including, not only stocks, but also gold, copper, and the USD – it was potentially shaping up to be a new kind of hedge against market volatility. If Bitcoin worked by a different set of rules, it might be able to preserve the value of our money when turmoil shakes up the markets.
Many financial analysts have made this argument in support of their bullish case for Bitcoin. Sygnum, for instance, declared that “Bitcoin could become a lifeline, a way for citizens to preserve their wealth or even carry out transactions when the local financial system is compromised”. Those analysts added that the trend of lessening trust in fiat currencies could briskly push Bitcoin ahead into this new role.
Like gold – the most famous safe haven asset – Bitcoin’s supply is limited, which should shield it from the erosive effects of inflation. More than that, the token’s value may continue rising, with growing demand chasing the fixed supply of 21 million coins. Perhaps Bitcoin is destined to take its place next to gold as a primary destination for safe haven flows. In fact, the token could knock gold off its pedestal, possessing certain qualities the metal could only dream of – weightlessness and instant transferability across the globe, and additionally boasting its own self-auditing mechanism on the blockchain.
In April 2025, Bitcoin overshadowed both US stocks and the dollar amid the market volatility caused by US import tariffs. Is Bitcoin outperforming gold? Can Bitcoin ever replace gold? Join us for some discussion.
The first thing to analyze, when considering Gold vs. Bitcoin as a good hedge, is the historical track record. That’s because, if Bitcoin hasn’t actually behaved like a hedge in the past, the claim that it is one remains just that – a claim.
In June 2022, US inflation had climbed to its highest in 40 years. With Americans intensely worried about the diminishing value of their savings, this was a prime opportunity for Bitcoin to show its worth as a hedge against rising prices. In that month, however, the coin’s value dropped to around $25,000, marking off a decline of over 60% from recent highs. Gold prices, for their part, remained steady.
Retreating to March 2020 – the heat of the Covid pandemic – the S&P 500 index tanked by over 30% compared with a month before. This was the perfect time for Bitcoin to display its talents as a hedge against market volatility. The digital token started the month at $9,100, but, by March 12th, it was worth only $4,300 per coin, even losing half of its value in a single day. “The very narrative that positioned Bitcoin as a hedge against traditional market risks crumbled”, in the words of analyst Ken Philips.
Going back a little further to the last quarter of 2018, global stocks crashed, with the Nasdaq falling by a massive 19%. Here was a chance for Bitcoin to strut its stuff as a hedge. After all, gold was thriving at the time, having rallied by 9.4% based on its reputation as a safe haven. Once again, though, this didn’t happen: Bitcoin plummeted by 55% in that quarter. In times when liquidity was draining from the market, traders were not turning to Bitcoin. On the contrary, they were ditching it fast.
In order for Bitcoin to be considered a safe haven like gold, it would have to prove its ability to preserve value in times of crisis; to demonstrate its low correlation with risk assets like stocks; and to maintain a fairly stable price trajectory. On the occasions mentioned above and many others, Bitcoin did none of the three.
Bitcoin’s original use case was as a peer-to-peer payment system that eliminates the need for middlemen. This is often cited as a bullish argument in the coin’s favour. Since people may lose trust in the traditional financial system, it’s possible they will increasingly turn to decentralized systems like Bitcoin that work on the blockchain – a global, anonymous network that allows you to access and transfer your money no matter who you are and where you are located. Thus, it appears that Bitcoin isn’t merely a useless digital asset, but – potentially – an integral part of our future financial system. This reinforces the argument for Bitcoin one day taking the crown as the number one safe haven.
However, Nobel-prize-winning economist Paul Krugman takes issue with this argument. For a start, he disagrees with the suggestion that Bitcoin represents the future of money. “To be successful, money must be both a medium of exchange and a reasonably stable store of value”, he says. “And it remains completely unclear why Bitcoin should be a stable store of value”. Krugman also believes that Bitcoin’s deflationary nature makes it inherently unsuitable to be used as money. Since people buy the coin to hold and watch appreciate, rather than in order to spend, this rules it out as a viable medium of exchange. A financial system resulting from widespread use of Bitcoin would be characterized by “money-hoarding, deflation, and depression”, in Krugman’s words.
This doesn’t prove that Bitcoin couldn’t function effectively as a financial asset – whether risk-on or risk-off – but it does force us to make an important distinction. Bitcoin may indeed evolve into a genuine safe haven asset in the future, arriving in that position by the force of communal belief. But for someone to assert that, since Bitcoin is the future of money, its safe haven status will be enhanced, seems baseless. That’s because Bitcoin could never actually function as an alternative to the US dollar or the established financial system.
So, what does the case for Bitcoin as a hedge come down to? Belief. Imagine somebody screaming that his ticket will come up tops in the upcoming lottery, adding that several astrologers affirm his claim. Once we establish that we don’t believe in the astrologers’ predictive powers, all we have is a man declaring his personal belief without any proof. We certainly wouldn’t base our financial decisions on that.
For traders trying to evaluate whether Bitcoin can serve as a safe haven, there are several factors worth monitoring:
By following these indicators, traders can develop their own informed opinion rather than relying solely on optimistic forecasts.
For those interested in exploring this market, platforms like iFOREX provide access to crypto trading alongside traditional safe haven assets like gold trading — allowing investors to build diversified strategies tailored to their personal risk profiles.
Those who disagree with Krugman believe that the inevitable build up of group consensus, driven by increasing institutional adoption, commercial acceptance, and loss of faith in traditional finance, will suffice to cement Bitcoin into our future portfolios. It may not behave like a good safe haven today, but one day it will.
Even this group of analysts must admit that, in the meantime, Bitcoin remains highly sensitive to shifts in sentiment. These shifts occur frequently and dramatically due to regulatory crackdowns, high-profile crypto scams, and company meltdowns. Thus, for someone seeking out a safe haven in our times, and faced with the choice of gold vs. Bitcoin, gold must be the natural choice. However, for those traders interested in taking advantage of short-term price movements, Bitcoin offers great possibilities indeed.
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