Recent market turbulence has given investors a good test case for bitcoin vs. gold. The cryptocurrency is often called digital gold because it’s not a fiat currency. But through the volatility, bitcoin has shown that it has weaknesses. Spencer Jakab explains in The Wall Street Journal, writing:
An odd thing happened to financial markets when Israel bombed Iranian nuclear sites last week.
For the most part, the moves were what you would have expected: Stocks fell worldwide and U.S. benchmark crude jumped 7.3% Friday, wrapping up its biggest weekly gain since the Oct. 7 massacre in 2023. Meanwhile, the price of gold, a traditional haven in times of conflict, rose 1.5% to a record.
But gold’s supposed digital equivalent failed to play the same role. Bitcoin fell by 1.6% Friday, even more than the S&P 500, concluding a 4% drop over three days.
This isn’t the first time: Back in April, in the week following President Trump’s “Liberation Day” announcement, stocks swooned worldwide. Bitcoin did too, dropping 7.5% in six days. And it was directionless back in February 2022 as Russian troops massed on Ukraine’s border and then invaded. Gold, meanwhile, edged higher as tensions rose and kept climbing when the shooting began.
It’s tempting to gloss over bitcoin’s failures as a hedge against chaos in what has otherwise been a great year for cryptocurrencies. The U.S. government has gone from skepticism to a full-throated endorsement under the Trump administration.
Even if it has lost some anti-establishment street cred, bitcoin still shares qualities with gold. Its supply is limited, it’s a trustless asset, it can’t be destroyed and it’s even easier than gold to transfer or hide.
So why has it failed as a geopolitical insurance policy? One reason is bitcoin’s digital nature. If you were to find yourself sitting in the smoldering ruins of your town after society collapsed, cryptocurrency at a brokerage like Coinbase, or even on a thumb drive in your pocket, wouldn’t be useful. Physical gold still might.
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