Gold has exhibited significantly higher risk-adjusted returns than Bitcoin in 2024, according to an analysis by Goldman Sachs. Although Bitc0in’s price surged, its volatility outweighs the gains, as shown in a Goldman Sachs chart.
Bitcoin (BTC) has gained over 40% this year, outperforming major equity indices, fixed-income securities, gold, and even oil, which saw a recent rise due to geopolitical tensions. However, Goldman Sachs data suggests that Bitc0in’s impressive performance in absolute terms does not offset its high volatility.
Bitcoin
The year-to-date return-to-volatility ratio for Bitc0in is below 2%, considerably lower than gold’s industry-leading risk-adjusted return of about 3%. This ratio measures the return an investment generates per unit of risk or volatility. Gold, in comparison, has risen 28% in absolute terms.
In fact, Ethereum’s native token, ether, along with Japan’s TOPIX index and the S&P GSCI Energy Index, are among the few non-fixed-income growth-sensitive investments with return-to-volatility ratios lower than Bitc0in’s, according to Goldman’s Oct. 7 report titled “Oil on the Boil.”
Bitcoin
This relatively low risk-adjusted performance confirms the long-held view of crypto skeptics that Bitcoin is too volatile to serve as a reliable safe haven, unlike gold. This was further emphasized last week when gold surged and Bitcoin fell alongside equity markets after Iran launched missiles at Israel, escalating tensions in the Middle East.
The low risk-adjusted returns make directional bets on Bitc0in less attractive. This likely explains the popularity of the Bitc0in cash-and-carry arbitrage strategy among institutional traders. This strategy allows traders to avoid price volatility risks while benefiting from price differences between spot and futures markets.
(12:25 UTC: Updated to correct the return-to-volatility ratios for BTC and gold to below 2% and around 3%, respectively.)
Conclusion
Bitcoin has surged 40% year-to-date, outperforming many major assets. However, its high volatility limits its appeal as a safe haven. In contrast, gold, with its superior risk-adjusted returns, continues to prove its reliability and stability, especially in times of market uncertainty. This solidifies gold’s position as the preferred asset for cautious investors.
