Gold or Bitcoin? The Case for Adding Both to Your Portfolio in 2025

As 2024 comes to a close, both gold and Bitcoin have experienced remarkable growth, achieving record highs that highlight their emerging roles in alternative investment strategies. While these assets may seem comparable at a glance—both serving as a hedge against traditional portfolio risks—their fundamental differences can create unique opportunities for investors. So, should you consider adding both gold and Bitcoin to your portfolio as we approach 2025?

An Analyst’s Perspective

Edmund Moy, a senior IRA strategist at U.S. Money Reserve, asserts that while cryptocurrencies like Bitcoin are often viewed as rivals to gold, the two assets actually have contrasting characteristics that can benefit a diversified portfolio. “Clearly, gold and Bitcoin aren’t the same,” Moy stated, emphasizing their minimal correlation with one another, which offers a compelling reason for investors to include both.

The Benefits of Diversification

Diversification in any investment strategy is essential to manage risk; however, it’s important to understand that it does not eliminate risks entirely. “Investors concerned over equity valuations, geopolitical uncertainty, fiscal debt, and rate pressure could benefit from a position in gold,” says Mark Hackett, Chief of Investment Research at Nationwide. Meanwhile, he describes Bitcoin as a more volatile asset that has shown strong returns, albeit closely tied to movements in the technology sector and broader equity markets. Hackett suggests that those with a higher risk tolerance and longer investment horizons could likely find value in Bitcoin.

Appropriate Portfolio Allocation

According to BlackRock, an allocation of up to 2% in Bitcoin within a traditional multi-asset portfolio is a “reasonable range.” On the other hand, Thomas Martin, Senior Portfolio Manager at Globalt Investments, has currently allocated around 10% of his protocol portfolio to gold, potentially allowing up to 5% for Bitcoin. The rest of Martin’s portfolio is primarily invested in stocks and bonds, with the proportions adjusted based on individual options.

With gold showcasing low correlation to equities, bonds, and cash, it is viewed as a reliable store of value during market volatility. In contrast, Martin notes the risk involved with Bitcoin given its limited history—only 15 years compared to gold’s 5,000. “The trade-off is that you have a chance that you could lose 100% of your money,” he cautioned, while simultaneously acknowledging Bitcoin’s potential for exponential growth over time.

Performance Review: Bitcoin and Gold

Bitcoin achieved significant milestones in December 2024, surpassing $100,000 for the first time—a key indicator of its transition into mainstream financial considerations. In contrast, gold has risen more than 30% this year, driven by demand arising from geopolitical uncertainty, strong central-bank buying, and ongoing discussions surrounding de-dollarization. Its price peaked at an all-time settlement high of $2,800.80 per ounce in October, before stabilizing around $2,709.40.

Understanding Correlation

Research shows that gold has a negligible correlation with stock market movements—approximately 0.03% correlation with the S&P 500 since 1971, which is virtually insignificant. Conversely, Bitcoin’s correlation to the S&P 500 is about 0.21, indicating some level of market-driven influence. Significantly, this low correlation allows gold to serve as an effective hedge during times of economic volatility and high inflation, while Bitcoin remains a riskier speculative asset.

Looking Ahead: Is 2025 the Year for Both?

Investors are often drawn to Bitcoin by its potential for high returns, even as the asset class carries heightened risk compared to gold. Federal Reserve Chairman Jerome Powell recently noted that while Bitcoin might serve as a speculative store of value, it remains a volatile investment vehicle. “It’s just like gold, only it’s virtual,” he said at a recent event, but this likeness must be scrutinized further.

Mike Maharrey, a market analyst, reinforces this point by highlighting the distinctive qualities of gold as a stable store of value. “Clearly, Bitcoin and gold aren’t the same; they are different assets that can both boost a diversified portfolio.” The nuances between the two further illustrate why a balanced approach that incorporates both assets could benefit savvy investors looking to manage risk while capturing potential market upside.

Conclusion

The dynamics of gold and Bitcoin are shaping up to be incredibly significant for investors heading into 2025. As both assets continue to prove their value in times of uncertainty, considering a dual approach—allocating positions in both assets—could be wise for those looking to navigate the complexities of a changing economic landscape. As always, understanding your risk appetite and investment goals will remain paramount.