Bitcoin has surged over 40% this year, outperforming many other investments like stocks, bonds, oil, and even gold. At first glance, this might make Bitcoin the best option for investors. However, when we dig deeper, gold still comes out on top in one important area: risk-adjusted returns.
Goldman Sachs recently released data showing that while Bitcoin’s price has jumped massively, it’s still much more volatile compared to other assets. The return-to-volatility ratio, which measures how much return you get for every unit of risk you take, is much lower for Bitcoin. Bitcoin’s ratio is below 2%, while gold’s ratio is about 3%. This means gold gives you more stability and better returns for the risk you’re taking on.
This difference in risk-adjusted returns is why many still view gold as the safer choice. Gold has a long history as a “safe haven” asset, a place where investors turn during uncertain times. For example, last week when tensions between Israel and Iran escalated, gold’s price went up as stock markets fell. Bitcoin, on the other hand, followed stocks and dropped, showing it doesn’t yet offer the same safety as gold.
The high volatility of Bitcoin makes it less appealing for buying traders who are looking to avoid risk. This is why some investors prefer to use strategies like arbitrage to profit from the price differences between Bitcoin’s spot and futures markets. These strategies allow them to bypass the unpredictable price swings while still making money.
So while Bitcoin’s gains are impressive, gold still wins when in terms of balancing risk and return. For now, gold remains a top choice for those looking to go after stability in their investments.
Disclaimer
The information provided in this article is only for educational and informational purposes and should not be considered financial or investment advice. We are not licensed financial advisors. Always conduct your research and seek guidance from a certified financial professional before making any investment decisions.
