Revisiting the hypothesis of ‘digital gold’

As we look back at 2025—a year defined by heightened volatility yet robust cross-asset class performances—several key elements stand out. First, for the second consecutive year, gold tops the main asset class performance rankings, up +66.0% (in USD terms), having reached a new record high in late December before consolidating in the last few trading sessions of the year. Historically, 2025 marks the yellow metal’s strongest performance in over half a century. Only other precious metals have surpassed gold’s extraordinary rise, with silver and platinum surging in an unprecedented rally that shows no signs of abating in 2026.

Second, in stark contrast, Bitcoin ranks among the year’s worst performers, closing the year down -6.3% in USD terms. The digital coin has shed nearly 30% of its value since its previous all-time high of USD 126,198 at the start of October, having hit an interim low of USD 80,553 in late November before moving into sideways consolidation. Bitcoin ETFs saw record monthly outflows in November and December last year.

Yves Bonzon Group Chief Investment Officer and Member of the Global Wealth Management Committee, Bank Julius Baer & Co. Ltd.

Bitcoin - Digital gold or Nasdaq on steroids?

The fact that gold held up well while Bitcoin tanked is, for some, evidence that the notion that Bitcoin is a digital equivalent to gold is plainly wrong. But let’s take a step back first. 

Fundamentally, gold and Bitcoin share many underlying price drivers and characteristics. One of the most notable aspects is that, when held in physical form in the case of gold, or in a decentralised wallet in the case of Bitcoin, they represent the ultimate hedge against counterparty risk. When you buy a corporate bond, you hold a claim on the issuing company. Similarly, when you buy a stock, you have a claim on the residual profits of the underlying business. In both cases, there is counterparty risk. Physical gold, however, carries no such feature and therefore offers protection against systemic risk, as it did during the Great Financial Crisis and the eurozone debt crisis. Bitcoin also has no counterparty risk, yet its effectiveness in a systemic risk scenario remains untested.

Another point of comparison is that both assets are inherently disinflationary given their limited supply and, in that sense, could serve as protection against monetary debasement. While gold supply is constrained by the physical limitations of natural resources, Bitcoin’s protocol imposes a hard cap of 21 million coins.

Finally, both gold and Bitcoin are liquid assets allowing investors to diversify their portfolios away from assets potentially at risk in the event of Western sanctions. In light of the unprecedented measures taken by Western nations following Russia’s invasion of Ukraine in 2022, non-Western pools of capital may have opted to move some capital out of the ‘centralised’ Western financial system and into assets where Western governments have limited ability to freeze or seize them. In the case of gold, its remarkable ascent is fundamentally underpinned by structural demand for physically backed gold financial instruments, particularly from non-Western central banks.

On the other side of the equation, one notable difference between the two is that gold investors probably do not use much leverage, whereas Bitcoin investors, especially those with speculative motives in the retail segment, do. Looking back at the divergence between gold and Bitcoin in 2025, it is important to note that the correlation between these two assets can sometimes turn negative in the short term, precisely for that reason. During such periods, investing in Bitcoin resembles holding a high-beta IT stock. In other words, leveraged investors may trade both digital assets and US IT stocks, and when margin calls occur, they are forced to sell down both positions, amplifying co-movement. This dynamic would also play a key role in the event of a systemic crisis.

Gold and Bitcoin – similar drivers, different tail risks

In the longer term, gold is likely to appreciate as long as Western governments continue to weaponise their capital markets for sanction purposes. The hypothesis of increased structural demand for assets that shield against the consequences of such actions remains valid, at least until the scenario of a Ukraine peace agreement materialises, as such an agreement – particularly one including a clause to unfreeze Russian assets – could trigger sudden profit-taking in out-of-system assets.

For a long time, our view was that this argument also applies to Bitcoin, as we regarded the original ‘native’ token as the only digital asset capable, in principle, of fulfilling the role of digital gold. This call is no longer valid as the emergence of quantum computing casts doubt on its security. Quantum computers pose a significant threat to Bitcoin, with estimates suggesting they could potentially enable the theft of over 6 million bitcoins, thereby drastically destabilising the entire ecosystem. Admittedly, this is a tail risk scenario for now, but the relevant time horizon is approaching more rapidly than initially expected. No one can assess with certainty how real the risk is. In any case, even if the probability is infinitesimal, especially in our capacity as wealth managers beholden to our fiduciary duty, we prefer to err on the side of conservatism when it comes to our allocation to the yellow metal’s potential satellites and substitutes. The short-term impact on the price of Bitcoin may be limited, but its store of value premise is severely challenged. While there is debate about whether coins vulnerable to quantum computers should be burned preventively to avert future theft, this would constitute expropriation, further undermining the core tenets of Bitcoin. Our view is Bitcoin should no longer be considered the digital equivalent of gold and hence also does no longer belong to the group of out-of-system assets that serve as a viable long-term hedge against fiscal dominance and fiat currency debasement. 

Biography

Yves Bonzon is a prominent investment management professional in the private banking industry. He joined Julius Baer in February 2016 as Group Chief Investment Officer and sits on the Bank’s Global Wealth Management Committee. Following a traineeship in wealth management and corporate banking at UBS, he began his career at Pictet in Geneva in 1989. Over the years, he became an equity partner, Group Managing Director and Chief Investment Officer of the Wealth Management division. In 1998, he became chair of Pictet’s investment committee. Yves holds a degree in Economics from the University of Lausanne (lic. oec. HEC).