Summary of this article
People buy gold for different purposes than they do with Bitcoin - the two assets end up behaving very differently when things get rocky in the economy.
Gold shines when people lose faith in currencies, institutions, or the money system. Bitcoin reacts more to market shifts.
A practical way to include both gold and Bitcoin is to separate insurance from optionality.
Gold and Bitcoin often get placed in the same bucket – scarce, outside the banking system and crisis assets. Gold has proven to be the ultimate ‘financial bunker’ during world conflicts, while Bitcoin has behaved more like a high-risk tech investment. They might share the same narrative, but they do not respond to market stress in the same way.
Both gold and Bitcoin have strictly limited supplies. Gold’s limit comes from Earth’s geology. Bitcoin’s limit comes from its digital code. But markets care about demand too, not just supply. That’s because people buy gold for different purposes than they do with Bitcoin, the two assets end up behaving very differently when things get rocky in the economy.
“Bitcoin and gold respond differently to stress. Gold shines when people lose faith in currencies, institutions, or the money system. Its buyers focus on the long term and ignore short-term price swings. Bitcoin reacts more to market shifts. Things like liquidity, capital access, regulations, and risk appetite matter most. These can change fast, and Bitcoin's price shows it,” says Purvang Mashru, Senior Quantitative Research Analyst at 1 Finance.
When both types of concerns hit at once, Bitcoin and gold can move together for a while. When they don't, correlation drops. That's why any alignment is temporary.
"A practical way to include both gold and Bitcoin is to keep gold as the core hedge when the confidence in currencies, governments or institutions gets tested and add Bitcoin as a small satellite in the portfolio, as it can outperform sharply in liquidity cycles. As market environments change, the relationship between Bitcoin and gold shifts with them," informs Mashru.
Taxes matter too. Long-term capital gains (LTCG) in gold are taxed at 12.50 per cent while short-term capital gains (STCG) are taxed at slab rates. Crypto, on the other hand, is taxed flat 30 per cent on every profitable transaction, with no offsetting of losses.
Many investors get crisis assets backwards. They buy them after the headline when the prices have already reacted, and emotions are high. The better approach is to decide your allocation based on your goals, time horizon and risk tolerance. Both gold and bitcoin can add value to your portfolio if structured correctly.
"Most investors get “crisis assets” backwards: they buy them ‘after’ the crisis headline, when prices are already reacting and emotions are running high. The better approach is to ‘decide your crisis-asset allocation in advance’, size it so you can hold it through volatility, and ‘build it gradually’ (stagger entries) instead of making one big, fear-driven purchase," says Mashru.
Once set, rebalance mechanically (say, annually or when it drifts meaningfully), and let it do its job quietly. If you need gold or Bitcoin to ‘save’ your portfolio in a panic, the problem is usually the portfolio design – not the hedge.
