With Bitcoin back to all time highs this week, we can all revisit our FOMO and/or regrets for not buying more, or buying earlier.
The thing that holds most people back is the volatility. Bitcoin’s averaged about a 50vol over the past year, which is nearly 8 times as much as bonds and 3x that of stocks:
Most investors may do less, or none at all, given that volatility, but some investors are pairing Bitcoin with Gold to dampen the volatility ?!
In a recent episode of The Derivative, we sat down with David Dziekanski of Quantify Funds to explore a timely and tactical approach to long-term diversification: pairing Bitcoin and gold in a single portfolio.
Listen to the full episode here.
They’ve got a piece up on their website showing just how Bitcoin and Gold work together, and color us surprised. Gold has recently demonstrated resilience during periods of Bitcoin drawdowns. If Bitcoin is digital Gold (and it surely has been acting like that since Liberation Day and now amidst the US debt downgrade), it sure doesn’t act entirely like Gold…
Bitcoin Drawdowns vs. Gold Performance (source: Quantify Funds)
Over the past six months, Bitcoin and gold have had a correlation of just 4%. Gold has shown consistent strength during periods of Bitcoin weakness. Source: Quantify Funds. Based on futures data.
Now, maybe this is just that Gold has been good lately, no matter what else is going on. But maybe there’s more to it? As David noted on The Derivative, the two assets respond to different macroeconomic forces, Bitcoin to market sentiment and adoption cycles, and gold to inflation expectations and real interest rates. This structural difference is what makes return stacking with both assets so compelling for long-term investors.
Here’s their chart showing the combo with about the same vol, and much higher returns, since Trumps election:
Tune into the full episode with David Dziekanski to hear more, or check out the paper on the Quantify Funds website, to see how they are thinking about pairing these assets.