Bitcoin, gold and digital gold: in theory and in practice

The ‘digital gold’ narrative has been central to Bitcoin's investment thesis for years. Proponents argue that Bitcoin shares gold's key attributes, including scarcity, durability, portability and immunity from government manipulation. 

Yet recent market events have exposed a significant gap between theory and practice, raising fundamental questions about whether Bitcoin truly functions as a safe haven asset.

Tariff test

19 January 2026 delivered was arguably a real-world experiment. When President Trump announced 10% tariffs on eight European countries over the Greenland dispute, markets responded with brutal clarity. Gold prices touched $4,689 per ounce, a then all-time high. Silver hit $94 per ounce. 

Meanwhile, Bitcoin plummeted from the mid-$95,000s to below $93,000 within minutes during Asian trading hours.

While precious metals rallied on geopolitical uncertainty, Bitcoin behaved like a high-beta technology stock, getting sold off as portfolios de-risked. The contrast highlighted Bitcoin's current role in the macro environment: during risk-off events, it often acts as a high-liquidity instrument that investors dump first, rather than a shelter from the storm.

However, there is some nuance to consider. The selloff occurred as geopolitical headlines hit an already fragile crypto market, and the immediate casualty wasn't long-term holders but traders running leveraged positions. CoinGlass data showed approximately $525 million in long liquidations within 60 minutes, rising to $790 million over 24 hours. This mechanical selling magnified what might have been a modest headline-driven move into something more.

The fundamental question this raises is not whether Bitcoin can serve as a hedge over the long term, but whether it can function as one during the critical first hour of a crisis when liquidity becomes paramount. 

Based on this evidence, the current answer appears to be no.

Gold's ascent

To understand Bitcoin's challenge, we need to examine why gold continues to thrive as the ultimate crisis hedge. The precious metal's performance has been exceptional, with prices soaring more than 60% in 2025 alone. 

Central banks, particularly in emerging markets, have been accumulating gold at an unprecedented pace to diversify reserves and hedge against currency risk. This institutional buying provides a stable demand floor that Bitcoin lacks. When the European Union contemplates €93 billion in retaliatory tariffs and threatens to deploy its Anti-Coercion Instrument across goods, services, investment and procurement, central banks don't yet reach for Bitcoin. They may buy more gold.

Inflation pressures also favor gold. With inflation remaining above target in major global economies and concerns mounting over rising global debt, investors seem to be increasingly viewing gold as protection against currency debasement. And the expected Federal Reserve interest rate cuts in 2026 make gold perhaps more attractive since the opportunity cost of holding a non-yielding asset decreases when rates fall.

But most importantly, gold benefits from thousands of years of established behavior. When geopolitical tensions escalate, the reflexive move toward gold is deeply embedded in market psychology. Everyone knows everyone else will buy gold in a crisis, creating a self-reinforcing dynamic that Bitcoin has yet to establish.

Several of the largest financial institutions in the U.S. forecast gold could reach $5,500 per ounce or more in 2026, reflecting expectations that policy risk is becoming permanent rather than episodic.

Is Bitcoin digital gold?

Despite the recent divergence, dismissing Bitcoin's potential as digital gold seems premature. Several compelling arguments support the long-term thesis, even if the short-term behavior remains volatile.

First, Bitcoin's fundamental properties genuinely mirror gold's most important characteristics. With a fixed supply of 21 million coins, Bitcoin offers provable scarcity that even gold cannot match. Its decentralization means no government can arbitrarily inflate the supply, addressing concerns about fiat currency debasement that drive investors toward gold in the first place.

Its portability represents another significant advantage. While gold requires physical storage, security and transportation, Bitcoin can be transferred globally in minutes. For individuals in countries with unstable currencies or authoritarian governments, this mobility is transformative. Bitcoin enables wealth preservation and transport in ways that would be impossible with physical gold.

The same week Bitcoin crashed on tariff news, crypto investment products attracted $2.17 billion in inflows, the strongest weekly performance since October. Bitcoin led with $1.55 billion, while Ethereum added $496 million and Solana drew $45.5 million. This suggests institutional investors are taking a fundamentally different view than short-term traders.

These flows were heavily front-loaded earlier in the week, before the Friday selloff when $378 million flowed out due to geopolitical tensions. The pattern reveals a bifurcated market: leveraged speculators are treating Bitcoin as high-beta risk, while long-term institutional allocators may be viewing pullbacks as accumulation opportunities.

Regionally, the United States dominated with $2.05 billion in inflows, but Germany, Switzerland, Canada and the Netherlands also posted positive flows. This geographic diversification suggests Bitcoin is gaining traction as a portfolio component across developed markets, not just among retail.

Market structure vs fundamentals

One critical distinction often overlooked in the digital gold debate is the difference between Bitcoin's fundamental properties and its current market structure. On-chain data suggests Bitcoin's underlying health remains robust despite short-term price volatility.

For example, implied volatility for Bitcoin has only marginally increased despite renewed tariff threats. Volatility has actually fallen sharply since mid-November, with a repricing of roughly 18 to 25 volatility points over the past two months. This compression indicates traders aren't aggressively hedging downside or chasing upside through options. Bitcoin is currently less volatile than Nvidia, a remarkable shift for an asset often characterized as wildly speculative.

This evolving market structure reflects Bitcoin's maturation. ETF inflows, corporate treasury adoption and long-term holder redistribution are transforming Bitcoin from a purely speculative asset into something more institutionalized. 

Will this structural evolution eventually align Bitcoin's crisis performance with its fundamental properties? Only time will tell.

Three possible scenarios for Bitcoin

How Bitcoin performs in the coming months will depend largely on how the tariff situation evolves:

1. In a de-escalation scenario over the next few weeks, where diplomatic backchannels soften the U.S. stance, risk assets could stabilize. This would allow Bitcoin's post-liquidation bounce to carry toward $98,000, though cleanly breaking above that level likely requires sustained institutional inflows.

2. Another path could see NEW tariffs taking effect over the next few months, but with European retaliation remaining contained. In this case, Bitcoin may trade within an $84,000 to $98,000 range, experiencing periodic leverage flushes on new headlines but avoiding any structural breakdown.

3. The third scenario involves escalation to 25% tariffs and broader EU countermeasures extending into June. If Europe deploys its Anti-Coercion Instrument targeting services, investment and procurement, markets may reprice growth more aggressively. Bitcoin could test its current $80,000 support level with potential for overshoot.

The new Initial Jobless Claims data, which could well be a potential volatility trigger if macro signals shift the balance. However, this continued focus on traditional economic indicators only shows how Bitcoin remains somewhat tethered to conventional risk assets despite its digital gold aspirations.

Overall, the evidence suggests Bitcoin is in transition. It possesses many of the theoretical attributes of digital gold but doesn't yet function as a crisis hedge when it matters most. The asset that is supposed to protect investors during geopolitical turmoil instead amplified their losses through leveraged liquidations.

However, the strong institutional inflows during the same period suggest sophisticated investors are looking past short-term volatility. While past performance is not a guarantee of future results, Bitcoin's intrinsic value continues to trend higher over the medium to long term, with recent pullbacks seemingly consistent with healthy market dynamics.

Perhaps the best answer we have for now is that crypto remains a market that clears leverage first and writes the narrative later. Bitcoin may eventually fulfil its digital gold thesis, but that transformation requires time, deeper liquidity and continued institutional adoption that changes reflexive market behavior during crises.

For now, gold is telling the future in the simplest way: markets are paying up for protection. Bitcoin's future may be bright, but investors seeking immediate safe haven protection in geopolitical turmoil should recognize that digital gold still behaves more like digital risk. 

The asset class is maturing, but the journey to crisis hedge remains incomplete.

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