With Gold and Bitcoin - two assets that typically trade higher on the back of heightened fear - both rallying in the wake of macroeconomic uncertainty, investors have every right to ask which one is more deserving of a place in their portfolio?
While gold recently blasted past US$4,000 – which saw many ASX 200 gold stocks double their value over the past year – the world's biggest cryptocurrency, Bitcoin, notched its own record high yesterday, with the token trading for US$126,198.07, according to data from CoinMarketCap.
Before answering the question of gold or Bitcoin, Charlie Sherry, Head of Finance at Australian cryptocurrency exchange BTC Markets, says investors need to understand that both assets are designed to play very different roles.
While gold is acting as a traditional safe haven, Sherry reminds investors that Bitcoin is capturing momentum from ETF inflows, post-halving dynamics, and growing institutional adoption.
The Bitcoin halving Sherry is referring to is an event – occurring approximately every 210,000 blocks – that’s designed to control the issuance rate and total supply of the cryptocurrency.
During the halving event, the number of new Bitcoins created with each block mined is reduced by half.
Initially set at 50 Bitcoins per block, the first halving in 2012 reduced the reward to 25 Bitcoins per block. Subsequently, the second halving in 2016 further reduced it to 12.5 Bitcoins, and so on.
Swing to hard assets
“Both [gold and Bitcoin] are being driven by the debasement trade, investors looking to protect against the erosion of fiat currency value,” Sherry told Azzet.
Simply put, debasement trade relates to bets by investors that scarce, hard assets will outperform fiat currencies in an era of mounting government debt and persistent inflation.
“In this environment, Bitcoin appears to have stronger upside potential, while gold continues to offer stability.”
However, Sherry also reminds investors that a diversified approach is gaining traction as investors rethink what "'hard assets’ look like in a digital age”.
Meanwhile, given that gold is what he describes as an excellent diversifier of the portfolio, billionaire investor and founder of Bridgewater Associates, Ray Dalio is placing strong bets on the role of gold.
From a strategic asset allocation mix perspective, he suggests you would probably have something like 15% of your portfolio in gold amid rising inflation and debt.
Back to the 70’s
Speaking at the Greenwich Economic Forum this week, Dalio drew parallels between today's market environment and the early 1970s when inflation, rising debt and government spending eroded confidence in traditional stores of wealth.
“It's very much like the early '70s," Dalio noted.
"When you are holding money and you put it in a debt instrument … it's not an effective storehold of wealth."
With the United States this year expected to spend around US$7 trillion (A$10.6 trillion) and take in only US$5 trillion, Dalio believes today's mix of large fiscal deficits – plus geopolitical tension, and currency debasement - is creating similar conditions to the 1970s that were defined by stagflation.
What investors should be aware of, adds Dalio, is that stagflation- defined by high inflation combined with weak growth – typically punishes savers and rewards holders of hard assets.
With all this playing out, Dalio looks to gold as offering unique protection given that it sits outside the financial system.
In other words, unlike bonds or savings accounts, gold is the only asset that you can hold without having to depend on somebody else to pay you money.
It’s this independence that has attracted investors back to tangible assets - physical items with economic value - in 2025.
Unsurprisingly, the debasement trade, which emerged late last year and has accelerated in recent months, is nowhere more evident (beyond gold) than in Bitcoin, while silver is also at a record high as confidence in fiat currencies fades.
Think of it this way; with investors’ second-guessing trust in paper money – as global debt ratios climb and central banks cutting rates despite lingering inflation - demand for traditional safe havens, like gold, plus digital alternatives like Bitcoin has been reignited.
Has Bitcoin peaked, or does it have further to run?
Research by JPMorgan analysts suggests Bitcoin could be undervalued by as much as 40% compared to gold on a volatility-adjusted basis.
Based on the broker’s numbers, Bitcoin has upside of around US$165,000 if current trends persist.
While the analysts’ research suggests it was retail investors who initially led the charge, institutional buyers have since piled on it, diversifying away from fiat currencies as a hedge against economic uncertainty.
Meantime, while gold remains the go-to hedge for many conservative investors, Bitcoin's growing mainstream acceptance has expanded the menu of what are referred to as store-of-value options.
In short, both assets have moved forward on the back of what Dalio and other market commentators see as a "loss of faith in currency stewardship", especially as U.S. deficits continue to run well above historical averages.
Meanwhile, a growing chorus of fund managers echo Dalio’s observations that, unlike past cycles, the current surge in debasement trade is less about the market’s reaction to short-term events, such as the current U.S. government shutdown, and more about a broader structural re-evaluation of money itself.
