Analysts Say Stress-Testing Gold vs. Bitcoin Reveals a Clear Winner

• Bitwise analysts stress-tested gold and Bitcoin allocations across major equity drawdowns over the past decade.
• Gold consistently reduced losses during market sell-offs, while Bitcoin tended to outperform during recovery phases.
• Portfolios combining gold and Bitcoin delivered stronger risk-adjusted returns than holding either asset alone.

Ray Dalio’s recommendation that investors allocate roughly 15% of a portfolio to gold and Bitcoin has drawn renewed attention amid concerns over rising US debt and persistent deficit spending. The rationale behind the view centres on protecting portfolios against currency debasement and improving resilience during periods of market stress.

To evaluate that approach, analysts at Bitwise conducted a stress test across major equity drawdowns over the past decade, comparing a traditional 60/40 portfolio with variations that included gold, Bitcoin, or both assets together.

Across each major downturn – including 2018, 2020, 2022 and the 2025 tariff-driven sell-off – gold consistently reduced downside risk relative to equities and Bitcoin. In 2018, while equities and Bitcoin experienced sharp losses, gold delivered positive returns, providing defensive protection during heightened volatility. A similar pattern appeared during the COVID-driven market collapse in 2020, where gold’s decline remained modest compared with the steep drawdowns seen elsewhere.

The trend continued in 2022, when inflation pressures, aggressive rate hikes and the FTX collapse weighed heavily on risk assets, yet gold again outperformed both equities and Bitcoin. During the 2025 trade-related market pullback, gold once more delivered gains while equities and Bitcoin declined. These results demonstrate gold’s role as a stabilising force during periods of market stress.

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Returns Following Market Bottoms

However, post-drawdown recoveries revealed a different dynamic, with Bitcoin consistently generating stronger upside during market rebounds. Following prior market bottoms, Bitcoin materially outpaced both equities and gold during recovery phases, particularly in 2020 and 2023.

Measured across full market cycles rather than individual phases, portfolios holding both gold and Bitcoin delivered stronger risk-adjusted outcomes than those holding either asset alone. 

The combined allocation produced a materially higher Sharpe ratio than a traditional portfolio, highlighting its effectiveness as a long-term diversification strategy. Dalio’s broader argument emphasises that diversification, rather than asset selection alone, is key to navigating currency debasement and market uncertainty.

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