We look at the factors that drive gold and bitcoin and find some similarities, but bitcoin's relationship are newer as it becomes a fixture in traditional financial markets.
With gold and precious metals on the rise the past few years, we examine the factors affecting gold and “digital gold,” bitcoin.
Gold and bitcoin ownership differ in key areas, including central banks/governments, ETFs, and miners.
Gold’s relationships with macro factors are well entrenched, while bitcoin’s are emerging as it gets more integrated into traditional financial markets.
Bitcoin and Gold: Everyone Wishes for Bitcoin and Gold
With gold and other precious metals surging not just this year but over the past three years, we have received a growing number of questions about what is driving the rally — and how those same forces relate to “digital gold,” bitcoin. We have covered this topic extensively in prior research, and we encourage readers to revisit our April note, which compared bitcoin and gold across a range of economic, fundamental, and macroeconomic dimensions. The conclusions from that analysis remain highly relevant today.
In this note, we take the discussion a step further, exploring in greater depth how the two assets differ in terms of their macro sensitivities, ownership dynamics, and the drivers of their respective returns.
Bitcoin and Gold Ownership Differ in Key Areas
One important question to answer first is: who owns bitcoin and gold? The ownership classifications are not entirely analogous between the two assets, and piecing together bitcoin ownership requires stitching together various datasets, often with differing numbers, but we’ve done our best to complete the picture of ownership, given the limitations. We consider the breakdown of bitcoin ownership directionally correct, but not precise.
The most important takeaway when comparing ownership bases is that gold and bitcoin ownership differ in key classifications: central bank/government ownership, ETFs, corporate adoption, and miners.
Central Banks/Governments – Bitcoin is Under Owned
By way of history, gold has long been owned by central banks around the world as a foundations for their monetary base. While the “gold standard” has long been discarded in favor of fiat monetary systems, and no countries rely on gold as a monetary base today, central banks around the world still hold gold reserves, including the U.S., which is by far and away the largest sovereign holder of gold. Central banks have also been one of the largest net purchasers of gold over the past few years (see our previous note). By contrast, government ownership of bitcoin has come through a vastly different avenue, bitcoins confiscated in connection with criminal activity (the U.S., U.K., and China’s balances). While El Salvador and the U.A.E. have been notable outright purchasers of bitcoin (the U.A.E. through ETFs), central banks and sovereign nations largely have not been purchasers.
Bitcoin Overindexes on ETFs
Ahead of the launch of the bitcoin ETFs, we looked at gold ownership through ETFs as a potential guidepost for the bitcoin ETFs and concluded that investors relatively preferred bitcoin in the fund format compared to gold. That conclusion has only been reinforced since launch given how popular the bitcoin ETFs have been. Gold investors have a clear preference for physical ownership of gold through bars and coins. While an analogy might be bitcoin ownership through self-custodied wallets, that number is difficult to quantify. We do see large ownership of bitcoin on behalf of individuals via exchanges, a figure one might include when considering private investment in bitcoin.
Corporations are not Present in Gold Ownership
We were hard-pressed to find any corporate ownership of gold, whereas for bitcoin, it has been a growing trend since 2020 that has now grown into a full-blown industry, DATs. While the growth of DATs may be slowing, this is likely to remain a persistent gap in ownership between the two assets.
Gold and Bitcoin Miner Behavior is Completely Different
The behavior difference between gold miners and bitcoin miners could not be starker. Gold miners, such as Newmont, Barrick, and Agnico, sell off their entire production and hold little inventory. This contrasts with bitcoin miners (caveat: nearly half of the percentage shown in the table is Satoshi), that mine bitcoin into existence, and then hold them for investment purposes.
Odds and Ends – Jewelry and Unaccounted for Supply
Two last thoughts on ownership differences. First, a sizable percentage of gold is held in the form of jewelry, whereas no similar analogy exists for bitcoin (we hope). One might consider jewelry as a “store of value” and thus consider it under private investment, but that is not universally agreed upon. The other observation is that much of bitcoin’s supply is uncharted, whereas a small portion of gold is unaccounted for or in other industrial applications. Perhaps that will change, as more of bitcoin’s supply is mapped or perhaps better tracked with other data providers, but bitcoin’s pseudonymous nature will always result in substantial portions of uncharted balances.
Bitcoin is Catching Up to Gold in Size
Because bitcoin is hard to value, it produces no cash flow, earnings, or dividends to discount, one common analysis is to compare its size to gold. Even though gold has had stellar returns the past few years, bitcoin continues to gain ground on the asset when comparing their total market values (current price x bitcoins in circulation or gold produced). That share has both cyclical components embedded in it, with bitcoin’s share of gold’s value peaking at 10% in the prior two cycle peaks, as well as secular growth components to it – bitcoin’s share of gold continues to grow over time.
Bitcoin ETFs are Catching Up
The launch of bitcoin ETFs in the U.S. has been one of the most important developments in financial markets history, far surpassing the launch of the SPY or GLD ETFs even on an inflation-adjusted basis. The collective size of bitcoin ETFs relative to spot gold ETFs got a large initial boost from the conversion of GBTC, but then has been growing in a secular fashion since that time. At one point, when bitcoin hit an all-time high in December of 2024, the bitcoin ETFs briefly overtook the gold ETFs in terms of AUM, but that was short-lived. Gold has appreciated more than bitcoin this year, plus fund flows into gold ETFs have significantly outpaced bitcoin ETFs this year. However, given the popularity of bitcoin ETFs as well as new types of funds coming to market, we expect bitcoin ETFs to continue to gain ground on gold ETFs on a secular basis.
Macro Factors: What Drives Bitcoin and Gold
A common investor question is and has been what drives bitcoin and gold prices, and shouldn’t they be related? Unfortunately, despite one being actual gold and the other being given the moniker of “digital gold,” their returns are not correlated. This is best illustrated by the rolling 90-day correlations between the two assets depicted in the following chart. Bitcoin’s 90-day rolling correlations with gold have meandered over time, peaking at 0.57 and troughing at -0.37, but they have averaged 0.1 since 2015. Unlike bitcoin’s correlations with U.S. equities, which had a structural shift upward following the COVID-19-induced economic crisis, bitcoin’s relationship with gold hasn’t changed over time.
Correlations with Macro Factors
Since 2013, macroeconomic factors, such as the U.S. dollar index (vs. a basket of currencies), inflation, interest rates, and money supply, have played important roles for both bitcoin and gold. Gold’s relationships with these factors can be classified as structural and persistent. In essence, mature. Bitcoin’s relationships, however, show changes over time, maturing from what were historically idiosyncratic factors to ones that are more systematic in nature. As bitcoin has been more readily adopted into the traditional financial market ecosystem, its linkages with macroeconomic variables, such as global liquidity and real yields, have increased.
The following table highlights bitcoin and gold correlations (year-over-year changes measured monthly) with various macro factors over different time periods. We would caution against putting too much weight on the trailing 1-year observation (signs commonly switch here) as it is only 12 data points.
U.S. Dollar Index – Both Bitcoin and Gold Show Inverse Correlation
Gold has consistently registered an inverse relationship with the U.S. Dollar Index (measured vs. a basket of other fiat currencies). As the U.S. dollar has fallen, gold has tended to rise. Bitcoin also has an inverse correlation to the U.S. dollar, while the relationship is a bit less consistent and newer than gold’s, the trend is there. We would expect this relationship to only strengthen as time goes on and bitcoin is more embedded in the traditional financial market ecosystem.
Inflation is Not an Important Factor, Especially for Bitcoin
We know the community likes to pitch bitcoin as an inflation hedge, but unfortunately, here, the data is just not strongly supportive of that argument. The correlations with inflationary measures are neither consistent nor are they extremely high. Inflation expectations are a better indicator for bitcoin, but the correlation measures are still low. For gold, the inflationary measures are inversely correlated (surprising for an inflation protection hedge), although they are also inconsistent across periods.
Interest Rates – Powerful for Both Assets
The most important macro factor for both assets is interest rates, real and nominal. We like to focus on real rates for both bitcoin and gold, as we just highlighted how inconsistent inflation has been as a factor (real rates strip out inflation). For gold, the inverse relationship is both strong and long-held – when real interest rates fall, gold tends to rise (and vice versa). This is a well-known phenomenon for gold. For bitcoin, the inverse relationship with real rates is one that has emerged has strengthened over time. We would expect this trend to continue as bitcoin has been increasingly financially integrated within the broader traditional financial ecosystem.
Money Supply and Global Liquidity – Important for Bitcoin, Consistent for Gold
The impact that money supply (M2) has on bitcoin and gold is another crucial factor (given that both assets are global in nature, we prefer to look at global M2). For bitcoin, this relationship is persistently positive and strengthening over the years. This makes sense that loose monetary policies should benefit an asset like bitcoin, which also acts as a repository for global liquidity. For gold, a similar relationship has endured but has not been as strong as bitcoin’s.
Putting it All Together
Gold’s macroeconomic relationships have remained stable and structural over time, while bitcoin’s have emerged recently and strengthened as of late. This reflects bitcoin’s growing integration into the global monetary and financial landscape. Both now move in the same direction relative to key macro variables — inversely with the U.S. dollar and real yields, and positively with money supply and liquidity.
If we were to summarize how to think about each asset from a macro factor perspective, it is that gold serves as a real-rate hedge, whereas bitcoin has evolved into a liquidity barometer.
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