Rather than trying to figure out which of the two — gold or Bitcoin — is the better hedge, we believe that investors with an affinity for holding hedges in their portfolio could consider both gold and Bitcoin.
Last year, both gold and Bitcoin enjoyed remarkable runs. Given their characteristics, they are often compared. While gold is a natural asset that has earned its reputation as a store of value over thousands of years, Bitcoin is a technical asset that emerged from the Global Financial Crisis (GFC).
When it comes to hedging, both gold and Bitcoin should shield investors from systemic risks in financial markets and the risk of de-dollarisation. They should also hedge against “bad inflation” but not against “good inflation”. Lastly, gold is a risk-off asset and hedges against equity market risks, while Bitcoin is a risk-on asset that tends to suffer in times of equity market corrections.
