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The narrative coming into 2025 was gold is a great asset, but it does a better job preventing losses in your portfolio than it does driving outperformance. This is where bitcoin came in. The decentralized asset was pitched as a digital gold, or as I have previously called it “gold with wings.” The idea has been that bitcoin boasts the same sound money principles as the precious metal, but bitcoin’s unique properties (including the finite supply, the bitcoin halving feature, and the relatively young life since inception) should ensure bitcoin would continue outperforming gold. That hasn’t happened in 2025 though. In fact, gold has appreciated about 60% year-to-date, which is the best performance in nearly a half century. Creative Planning’s Charlie Bilello highlights “gold is now the best performing major asset class over the last 20 years with an annualized return of over 11%.” This performance, particularly the last 11 months, has driven central bank’s allocation to gold significantly higher. Charlie writes “gold now accounts for over 20% of global central bank reserves, the highest share we’ve seen in nearly three decades.” This central bank demand is important because it overcame the fact that US retail investors have essentially been net sellers of gold and silver since the big rally in price started in March 2024. But here is the part of the story that is confusing many investors — bitcoin and gold have historically traded in tight correlation. When gold has gone up, bitcoin has followed approximately 100 days later. These two assets benefit from the same tailwinds of higher national debts, undisciplined monetary policy, and geopolitical uncertainty. In response to these issues, investors prefer to allocate larger percentages of their portfolio to sound money assets. Assets that are outside the legacy system and assets that no one can create more of. So why is gold responding to the recent global developments, but bitcoin has lagged? Is it as simple as central banks have a lot of money, so they are driving gold to outperform because these large pools of capital are not allocating to bitcoin yet? Sure, that is part of it. But there is something more nuanced at play here. Most people are too focused on gold’s outperformance and forgetting to check bitcoin’s relative underperformance. Joe Carlasare shows the current bitcoin bull market has significantly underperformed past bitcoin bull markets. We haven’t seen the breathtaking price appreciation we have come to expect, which means the market has been void of the blow-off tops driven by the retail frenzy. If you have been buying bitcoin for speculative purposes, especially if the most attractive quality was it’s perceived asymmetry, you are very disappointed right now. I wouldn’t blame you. Bitcoin has not delivered on that promise so far in this cycle. But if you were buying bitcoin as a defensive asset to protect your purchasing power from currency debasement and out of control inflation, then you likely have been good with the results. Bitcoin is up about 1,500% since January 2020 and the asset has appreciated more than 18% in 2025. The asymmetry of bitcoin came from the high degree of risk an investor was taking when they bought the asset. You get paid for the risk you take. But bitcoin is not risky anymore. It is very obvious that bitcoin is not going away, the government is not going to outlaw it, and bitcoin will eventually seep into every sophisticated investors portfolio. So you should expect bitcoin’s return to come down from past bull markets. This doesn’t make bitcoin unattractive at all. Instead, it means bitcoin’s rise is essentially pre-ordained at this point. It will take time, but bitcoin is going to win on a global stage as one of the top store of value assets. Gold will do well alongside bitcoin. These two assets are not in competition with each other, but rather they serve as brothers in the fight against currency debasement. Coexistence is a good thing for both assets. But in the short-term, we may have hit a turning point this weekend. We are most likely to see a large rotation from the gold trade
