Among the more prominent claims is that Bitcoin’s characterisation as “digital gold” is breaking down. In sharp contrast to Bitcoin’s lack of momentum, gold outperformed significantly in 2025, buoyed by fiscal expansion, geopolitical uncertainty, and sustained central bank demand. Over a 1-year rolling period, Bitcoin has increased to around a 0.4 correlation, significantly up from around 0.0 in January of 2024. For some observers, this divergence is taken as evidence that the digital gold thesis has failed. The more important question is whether it reflects a structural shift or a cyclical phase within a broader monetary evolution.
While Bitcoin has trailed gold on an annualized basis, shorter-term comparisons overlook the distinct volatility profiles of each asset. Over longer cycles, Bitcoin’s compounded performance remains distinct, albeit delivered with higher volatility. Historically, drawdowns in the 70–80% range have been typical. These usually coincide with deleveraging or liquidity tightening, but they have still unfolded within an adoption curve that continues to expand.
Bitcoin’s prior three major cycles recorded peak-to-trough drawdowns of 77%–86%, underscoring that deep retracements are characteristic of its adoption curve rather than evidence of structural breakdown.
Figure 1: Bitcoin peak-to-trough drawdowns across market cycles (2013-2026,%)
The current cycle is unusual; gold’s parabolic macro bid has occurred alongside Bitcoin’s bear market. This creates a relative performance gap that appears starker than in prior cycles, but short-term divergence does not invalidate the monetary thesis. If gold’s primary driver is a hedge against fiscal dominance and debasement, the medium-term outlook for Bitcoin remains constructive. The negative correlation is a cyclical dislocation within a maturing asset class, rather than a structural shift.
A prevailing critique centres on Bitcoin’s institutionalisation, arguing that increased derivatives exposure has created a “tail wagging the dog” dynamic where speculative leverage distorts price discovery. This is not new. Similar concerns emerged during the 2017–2018 cycle following the launch of CBOE and CME futures. At the time, derivatives were blamed for price distortion. Yet in hindsight, that period marked an early stage in Bitcoin’s integration into global financial infrastructure.
Open interest on Bitcoin futures across all exchanges has trended structurally higher since 2020, reflecting deeper institutional participation and growing maturity in the derivatives market, despite cyclical deleveraging phase.
Figure 2: Bitcoin futures open interest, all exchanges (2019-2026, USD billion)
While leverage has increased, so has market depth. The shift from a predominantly retail instrument to a mixed institutional asset was an inevitable maturation milestone. Crucially, supporting infrastructure such as custody standards, regulatory clarity, and settlement efficiency is far stronger than in previous cycles.
Structural adoption metrics, including broader ownership distribution and persistent long-term holder supply, carry more weight than short-term speculative positioning. Institutional participation introduces new price dynamics, but it does not alter the asset’s hard-coded monetary properties.
Gold’s $36 trillion market capitalisation provides a useful monetary benchmark for Bitcoin’s addressable opportunity. Unlike silver, gold derives its value primarily from its role as a neutral reserve asset rather than industrial utility.
Bitcoin expresses similar properties–capped supply, bearer settlement, and jurisdictional neutrality–through code rather than chemistry. This remains the core of the digital gold thesis, and short-term underperformance relative to gold does not alter that foundation. to gold does not alter that foundation.
With gold’s market capitalisation at approximately $36 trillion compared to Bitcoin’s $1.3 trillion, the gap illustrates the scale of Bitcoin’s potential addressable market within the global store-of-value universe.
Figure 3: Bitcoin versus gold, total market cap (USD trillion)
The question of why Bitcoin continues to lag gold in the current macro environment is fair, particularly as investor focus shifts from maximising nominal return to preserving real value.
Two primary drivers stand out. First, even with the diminishing impact of the halving, Bitcoin’s cyclicality remains tied to a four-year rhythm, making the current bearish phase consistent with prior cycles (Figure 1).
Second, the divergence reflects allocation behaviour. Institutions making large capital decisions operate within governance frameworks shaped by reputation, precedent, and career risk. Allocating to gold in a period of macro uncertainty is professionally defensible, backed by centuries of validation and broad acceptance across central banks and pension funds.
Exposure to Bitcoin, despite its maturation, still carries a higher reputational cost for individual decision-makers. This is partly generational, as committees tend to favor what is familiar during stress. Viewed through this lens, Bitcoin’s relative underperformance reflects transitional allocation dynamics and institutional inertia rather than a rejection of its monetary properties.
The “digital gold” thesis was never predicated on Bitcoin acting as a perfect digital proxy for gold, and expecting sustained correlation overlooks differences in market maturity and liquidity regimes. Cyclical divergence does not imply structural failure.
The more relevant question is whether Bitcoin continues to exhibit the characteristics of a scarce, neutral monetary asset in an environment shaped by fiscal dominance. Consistent with Gresham’s Law, Bitcoin is being hoarded rather than spent, reinforcing its role as a digital reserve. Both assets compete across the store-of-value spectrum: gold remains the established monetary reference, while Bitcoin continues to build the infrastructure necessary to challenge that position.
For institutional allocators, the hurdle remains governance and oversight risk. As these constraints are reduced, the underlying monetary thesis is likely to reassert itself.
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