📈  Chart of the Week 10/19/2025

By Michael Allison, CFA

Following on last week’s Debasement Trade discussion, this week’s Chart shows the year-to-date performance of gold, Bitcoin, and Ethereum. It shows quite a divergence thus far in 2025. Gold’s relatively smooth and steady climb has stood in sharp contrast to the choppy and volatile trading patterns of the two leading cryptocurrencies.

Many regard cryptocurrencies, Bitcoin in particular, as “digital gold”—a decentralized non-physical store of value meant to hedge against the devaluation of the U.S. dollar and other fiat currencies. But this year, it’s the old-fashioned kind of gold that’s actually doing most of the heavy lifting.

Volatility is the key differentiator. Over the past decade, gold has typically exhibited annualized volatility in the 10–15% range, whereas Bitcoin has often swung between 50–80% annually. Ethereum’s volatility has been even higher.

This year’s pattern reflects that history: gold has trended steadily upward, while Bitcoin and Ethereum have zig-zagged wildly. For investors looking for a stable hedge against currency debasement or geopolitical shocks, that difference in realized volatility is not a rounding error—it’s the whole story.

Historically, gold has benefited from “flight to safety” flows during periods of macro uncertainty—think the Global Financial Crisis, the Eurozone crisis, and the pandemic shock. Crypto, by contrast, has yet to prove itself as a reliable defensive asset in those kinds of environments. In fact, Bitcoin has at times behaved more like a high-beta equity proxy than a hedge.

That doesn’t mean crypto shouldn’t have a place in many investors’ portfolios. One could argue that both gold and crypto might serve complementary roles. Gold offers lower volatility (than crypto) and stronger historical defensiveness. Crypto, by contrast, potentially offers asymmetric upside but at the cost of much higher drawdown risk.

My own view is that gold remains a classic hedge against inflation and currency debasement, while crypto—at least for now—is more of a high risk, speculative investment.

Sources: Federal Reserve Bank of St. Louis (FRED), CoinMetrics, Bloomberg.

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