Did Bitcoin Live Up to 'Digital Gold' Narrative in 2025?

Bitcoin was described as a ‘peer-to-peer electronic cash system’ by its founder, Satoshi Nakamoto, in the Bitcoin whitepaper. However, over the years, the narrative of Bitcoin as ‘Digital Gold’ has become dominant. This is not entirely surprising - for Bitcoin to truly be an alternative monetary system, the store of value function needs to come before the medium of exchange function. But did Bitcoin really live up to its dream of digital gold in 2025? Let’s take a look.

\ Tldr - partially, with a mixed record. Bitcoin still provided risk reduction in portfolios in spite of being in the red for 2025. It didn’t provide a convincing hedge against shock events like Trump tariffs, but continues to find a place in investor portfolios as a hedge against macro uncertainty and fiat printing (correlating to excess liquidity in the system). Gold clearly outperformed in this regard.

Bitcoin as Store of Value: Narrative vs. Market Reality

Bitcoin, as a complex adaptive system, has adopted its narrative over the years. The initial promise of fast, cheap, and global transactions has taken a back seat, while the censorship-resistant store of value function has become far more prominent. This is for the good - without a store of value, Bitcoin is not very useful as a medium of exchange either. Without censorship resistance, it cannot be a longer-term store of value.

\ The faster, cheaper transactions can still happen, just at higher layers than the base protocol layer, like Lightning and similar networks. The reason this is important to understand for investors is to place Bitcoin in the right context in their portfolio. Bitcoin is not competing with Visa anymore; it is competing with gold, real estate, and other such stores of value in our economy. The shift matters because the story of Bitcoin is not about network throughput and UX anymore; it is about volatility, drawdowns, and correlations with established assets under stress.

\ While Bitcoin has held up as a store of value pretty well over the last decade or so, it is showing increasing correlation with stock markets and liquidity drivers in the short term. Thus, during stress events - take Trump tariffs, aka Liberation day tariffs, in the US - Bitcoin tended to fall along with other risk assets. In the week following the April 2 tariff announcement, which was a classic risk-off shock, Bitcoin fell 7.3% while gold rose 1.3%. This highlighted Bitcoin’s continued sensitivity to liquidity-driven deleveraging.

\ 2025 showed that Bitcoin is at best an ‘emerging store of value’. This means it is still correlated to liquidity and risk assets and behaves partially like a tech stock in the early to mid-stage of adoption. Bitcoin’s evolution in 2025 has been driven less by protocol and technical changes and more by market structure. ETFs, perpetual futures, and global leverage now dominate price discovery. However, it also retains an upside that is hard to capture with gold, especially when viewed over a multi-year time horizon.

\ Thus, investors should be aware of its increasing short-term correlation to risk assets and monetary liquidity. Investors should also understand that Bitcoin is unlikely to protect against short-term shock events as well as gold. Over the long term, however, Bitcoin has provided strong diversification benefits to portfolios by improving the Sharpe ratio (a measure of risk-adjusted returns) of portfolios like 60/40 or long-only equities over a multi-year time horizon.

\ In addition, Bitcoin has a low correlation with gold over the longer term, and thus provides excellent diversification benefits for investors holding equities + gold style portfolios as well.

Bitcoin vs. Gold in 2025 - Risk and Return Comparison

Without mincing words, Bitcoin didn’t have the greatest 2025 in terms of its yearly return, especially compared to previous halving cycles.

\ Bitcoin started 2025 around $94k, reached a top of around $125k, before declining to around $88k towards the end of the year. Compare this to gold, which started the year around $2630/oz, reached a peak of around $4550/oz, and ended the year at around $4320.

An unexpected crash, dubbed the “10/10 crypto crash of 2025,” further eroded trust in the market structure, with record levels of liquidations, of up to $19 billion on a single day for the crypto market as a whole. This was the highest recorded single-day liquidations for crypto. The event proved the importance of the derivative market in driving the returns of Bitcoin in 2025, likely only to get stronger in 2026. All the ETF flow from retail wasn’t able to absorb the shocks of the derivatives market, especially the perpetual futures traded on-chain.

\ The yearly return gap between Bitcoin and gold reached around 70pts, unprecedented over the last decade except during deep crypto bear markets, with Bitcoin experiencing higher volatility and a lower Sharpe ratio than gold for the year. In short, during 2025, gold benefited from sustained central bank buying and geopolitical hedging demand, while Bitcoin suffered from leverage-driven liquidations and a market structure still dominated by derivatives rather than end-holders

Role of Gold and Digital Gold in a Portfolio

Gold has been used as a store of value and medium of exchange long before fiat currencies became universally accepted. In fact, the idea of a government-issued fiat currency completely unbacked by gold is fairly unprecedented throughout history, and has become a global phenomenon via the US Dollar only since 1971. That story’s ending is yet to be written. Gold, on the other hand, has maintained some form of universal acceptance for millennia and across civilizations, so it is Lindy in a way few assets are.

\ There is a reason why central bank balance sheets hold Gold, and not Bitcoin. It is the same reason why China is buying up gold. Gold is the ultimate macro hedge in an uncertain world, including geopolitical instability and war. It is also an insurance against hyperinflation.

\ In modern portfolios, gold finds a place due to its mostly uncorrelated returns to the broader stock and bond market. There are, of course, periods in which gold correlates to broader markets, but over long periods of time and across different macro environments, gold is mostly uncorrelated to equities and bonds.

\ But the same is true for Bitcoin! Even though Bitcoin didn’t end the year in green, it has been broadly uncorrelated to the market. Here is Gold and Bitcoin in 2025 in a nutshell. You can see they are both not very correlated to the S&P 500 in 2025.

Bitcoin, of course, is still on the adoption curve, following Metcalfe’s law and generally being strongly correlated to broader macro liquidity signals. However, it is also a digital store of value - the newer generation is much more inclined to own assets like Bitcoin than their grandparents, and they will inherit trillions of dollars over just the next decade.

\ Bitcoin is also created with the explicit goal of creating an escape value from fiat printing. So yes, Bitcoin also protects a portfolio from geopolitical events, although you’d be hard-pressed to see that in the data in 2025.

Looking Forward to 2026

2026 would be pivotal for Bitcoin to prove its digital gold thesis. 2025 didn’t see a rotation from gold into Bitcoin. Gold added over $10 trillion in market cap in 2025 alone, more than twice the market cap of the entire crypto market, including all stablecoins. It is in a different league with central banks and China becoming the dominant players in 2025.

\ Bitcoin now has the technical pieces in place, from retail access via ETFs to corporates holding Bitcoin on their balance sheets, to plenty of potential geopolitical shocks. The biggest test of Bitcoin as a store of value would be how well it performs over an entire year in providing potential upside benefit while minimizing portfolio risks for a 1-5% portfolio allocation for standard portfolios like 60/40 equities to bonds.

\ More qualitatively, 2026 will define how well Bitcoin performs under tail-risk scenarios, not just on the downside but also on the upside.