Gold has been used for several millennia throughout the world for trade and commerce but more importantly as a store of value in a changing world. Major currencies pre-1971 were pegged to gold for a reason, as it established trust in that currency. From a portfolio management and risk management point of view, gold has always had a place for diversification. Its risks are different from traditional asset classes. The supply of new gold grows at a much slower pace than fiat currencies.
Bitcoin is relatively super new, but its promise is to have gold-like properties in the digital world. Most specifically, there will only ever be a fixed number of units of Bitcoin, which makes it scarce similar to gold. Bitcoin has also found itself as an asset that is valuable for portfolio diversification and risk management in a world where many fiat currencies experience high inflation. It is a monetary and geopolitical hedge in certain situations, similar to gold, but with very different return and risk characteristics.
Which is a better investment: BTC or XAU?
Over the past year, XAU outperformed (-19.6% vs +79.5%) with a Sharpe ratio of 2.26.
Cite This Comparison
"Bitcoin vs Gold (BTC vs XAU): 2026 Performance & Tail-Risk Analysis." Gale Finance, February 25, 2026. https://www.gale.finance/compare/btc-vs-xau/ Free to use with attribution. Please link back to this page or gale.finance.
Analysis period: 2025-02-27 to 2026-02-25
Relative Performance of BTC vs XAU (Normalized to 100)
Normalized to 100 at start date for comparison
Key Takeaways
- Total Return: BTC delivered a -19.6% total return, while XAU returned +79.5% over the same period. XAU outperformed on total returns.
- Risk-Adjusted Return (Sharpe Ratio): BTC had a negative Sharpe (-0.32) while XAU was positive (2.26), indicating XAU had meaningfully better risk-adjusted performance in this period.
- Volatility (Annualized): BTC was more volatile, with 45.6% annualized volatility, versus 25.1% for XAU.
- Maximum Drawdown: XAU's maximum drawdown was -13.9%, while BTC experienced a deeper drawdown of -48.9%.
- Tail Risk (VaR & Expected Shortfall): At the 5% level (daily log returns), BTC's VaR was -3.80% and its Expected Shortfall (CVaR) was -5.71%; XAU's were -2.26% and -3.79%. VaR is the cutoff; Expected Shortfall is the average move on the worst days.
- Skew & Kurtosis: Skew: BTC -0.15 vs XAU -1.21. Excess kurtosis: BTC 4.43 vs XAU 8.24. Negative skew leans downside; higher excess kurtosis means fatter tails.
- Tail Days & Extremes: 2σ tail days (down/up): BTC 9/9, XAU 6/4. Worst day: BTC -11.85% (2026-02-04) vs XAU -9.87% (2026-01-30). Best day: BTC +11.72% (2026-02-05) vs XAU +6.13% (2026-02-03).
- Risk ratios: Sortino - BTC: -0.45 vs. XAU: 3.28 , Calmar - BTC: -0.39 vs. XAU: 5.76 , Sterling - BTC: -0.86 vs. XAU: 5.46 , Treynor - BTC: -0.27 vs. XAU: 16.48 , Ulcer Index - BTC: 18.99% vs. XAU: 3.85%
Bitcoin vs Gold Correlation
Bitcoin and Gold are weakly correlated over the past year. With a correlation of 0.11, these assets show meaningful independence, offering diversification benefits when held together.
For portfolio construction, this weak correlation suggests that combining BTC and XAU could reduce overall portfolio variance. However, correlations can increase during market stress.
| Metric | Value |
|---|---|
| Current (30-day) | -0.14 |
| Average (full period) | 0.11 |
| Minimum | -0.18 |
| Maximum | 0.49 |
Correlation measures how closely two assets move together. Values near +1 indicate strong co-movement, near 0 indicates independence, and negative values indicate inverse movement.
Investment Comparison
If you invested $10,000 in each asset on February 27, 2025:
Difference: $9,908.99 (XAU ahead)
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Bitcoin and Gold: Risk Analysis
Bitcoin experienced its maximum drawdown of -48.9% from 2025-10-06 to 2026-02-04. It has not yet recovered to its previous peak.
Gold experienced its maximum drawdown of -13.9% from 2026-01-28 to 2026-02-02. It has not yet recovered to its previous peak.
Smaller drawdowns and faster recoveries indicate lower downside risk and greater resilience during market stress.
Sharpe Ratio of BTC and XAU
Sharpe ratio measures return per unit of risk (volatility). A higher Sharpe indicates better risk-adjusted performance. BTC had a negative Sharpe (-0.32) while XAU was positive (2.26), indicating XAU had meaningfully better risk-adjusted performance in this period.
A Sharpe above 1.0 is generally considered good, above 2.0 is excellent. Negative Sharpe means the asset underperformed the risk-free rate. Calculated on each asset's full 365-day lookback of available prices and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).
Sortino Ratio of BTC and XAU
Sortino ratio measures return per unit of downside risk. Unlike Sharpe, it only counts downside deviation (returns below the target return). XAU had better downside-adjusted returns.
A higher Sortino is better. It's useful when upside volatility is common (crypto is the obvious example). Downside deviation: BTC 32.5% vs XAU 17.2%. Calculated on each asset's full 365-day lookback of available prices, using the daily risk-free rate as the target return, and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).
Calmar Ratio of BTC and XAU
Calmar ratio compares CAGR to maximum drawdown. Higher Calmar means more return per unit of worst drawdown. XAU posted the higher Calmar ratio.
Calmar is computed on each asset's full 365-day lookback and uses the max drawdown over that same window.
Sterling Ratio of BTC and XAU
Sterling ratio measures excess return per unit of average drawdown (typically drawdowns worse than 10%). XAU posted the higher Sterling ratio.
Sterling uses average drawdown events deeper than 10% and subtracts the risk-free rate to report excess return.
Treynor Ratio of BTC and XAU
Treynor ratio measures excess return per unit of market risk (beta) instead of total volatility. XAU posted the higher Treynor ratio.
Treynor uses beta vs the S&P 500 (SPY) on shared dates and the average 3-month Treasury rate as the risk-free rate.
Ulcer Index of BTC and XAU
Ulcer Index captures drawdown depth and duration. Lower Ulcer Index means less drawdown pain. XAU had the lower Ulcer Index (less drawdown pain).
Ulcer Index is computed from each asset's drawdown series over the full lookback window.
Tail Risk & Distribution Shape (1-Year): Bitcoin vs. Gold
This section looks at the shape of daily returns, not just the average. Tail stats are computed per asset on its own daily series (crypto includes weekends). We use daily log returns so multi-day moves add cleanly.
Definitions: Value at Risk (VaR), Expected Shortfall, skew, kurtosis, and fat tails.
| Metric (1-Year) | BTC | XAU |
|---|---|---|
| 5% VaR (daily log return) | -3.80% | -2.26% |
| 5% Expected Shortfall (CVaR) | -5.71% (worst 19 days) | -3.79% (worst 13 days) |
| Skew | -0.15 | -1.21 |
| Excess kurtosis | 4.43 | 8.24 |
| 2σ tail days (down / up) | 9 / 9 | 6 / 4 |
| Worst day | -11.85% (2026-02-04) | -9.87% (2026-01-30) |
| Best day | +11.72% (2026-02-05) | +6.13% (2026-02-03) |
Downside co-moves (2σ) — 1-Year
Computed on shared dates only (n=256). A “2σ downside move” means a shared-close log return more than 2 standard deviations below that asset’s own mean on this shared-date series. Dates below show simple returns (%) for readability.
Show downside tail dates
Dates below are shared-date observations. The “Date” is the period end (close). Tail thresholds are computed on log returns, but the table shows simple returns (%) for readability. Returns are computed from the previous shared close to this one (for example, Friday → Monday includes weekend moves).
Days when both BTC and XAU had a big down day (2σ)
| Date (interval) | BTC | XAU |
|---|---|---|
| 2026-01-30 | -7.07% | -9.87% |
Days when BTC had a big down day
| Date (interval) | BTC | XAU |
|---|---|---|
| 2025-03-07 → 2025-03-10 | -9.21% | -0.84% |
| 2025-04-04 → 2025-04-07 | -5.57% | -1.75% |
| 2025-08-22 → 2025-08-25 | -5.69% | -0.22% |
| 2025-10-10 | -6.98% | +0.85% |
| 2026-01-16 → 2026-01-19 | -7.50% | +1.94% |
| 2026-01-30 | -7.07% | -9.87% |
| 2026-02-04 | -11.85% | +0.36% |
| 2026-02-20 → 2026-02-23 | -5.65% | +2.55% |
Days when XAU had a big down day
| Date (interval) | BTC | XAU |
|---|---|---|
| 2025-10-21 | -1.92% | -5.31% |
| 2025-12-26 → 2025-12-29 | -0.17% | -4.40% |
| 2026-01-30 | -7.07% | -9.87% |
| 2026-01-30 → 2026-02-02 | -3.22% | -3.85% |
| 2026-02-05 | +11.72% | -3.73% |
| 2026-02-12 | +4.05% | -3.20% |
Read this as “how ugly the ugly days get”, not as a precise forecast. One-year samples are small, so tail estimates are inherently noisy.
Bitcoin vs Gold Volatility (BTC vs XAU)
Bitcoin's annualized volatility of 45.6% means it typically moves ±2.39% on any given day.
Gold's annualized volatility of 25.1% means it typically moves ±1.58% on any given day.
BTC's higher volatility means a wider path to returns — this can be attractive for tactical, shorter-term exposure, while XAU's smoother profile may better suit long-term allocators seeking steadier growth.
For comparison, the S&P 500 typically has 15-18% annualized volatility, translating to roughly ±1% daily moves. Higher volatility means larger potential gains but also larger potential losses.
Bitcoin vs Gold Performance Over Time
| Metric | BTC | XAU |
|---|---|---|
| 30 Days | -23.5% | 3.1% |
| 90 Days | -25.4% | 24.2% |
| 180 Days | -37.2% | 49.6% |
| 1 Year | -18.8% | 79.5% |
Shorter time frames can show different leaders as market conditions change. Consider your investment horizon when comparing performance.
Full Comparison of Bitcoin vs. Gold (1-Year)
| Metric | BTC | XAU |
|---|---|---|
| Total Return | -19.6% | +79.5% |
| Annualized Volatility | 45.6% | 25.1% |
| Sharpe Ratio | -0.32 | 2.26 |
| Sortino Ratio | -0.45 | 3.28 |
| Calmar Ratio | -0.39 | 5.76 |
| Sterling Ratio | -0.86 | 5.46 |
| Treynor Ratio | -0.27 | 16.48 |
| Ulcer Index | 18.99% | 3.85% |
| Max Drawdown | -48.9% | -13.9% |
| Avg Correlation to S&P 500 | 0.47 | -0.06 |
| 5% VaR (daily log return) | -3.80% | -2.26% |
| 5% Expected Shortfall (CVaR) | -5.71% | -3.79% |
| Skew | -0.15 | -1.21 |
| Excess kurtosis | 4.43 | 8.24 |
| 2σ tail days (down / up) | 9 / 9 | 6 / 4 |
Audit this calculation
Formulas, inputs, and conventions used to compute the metrics on this page.
Inputs & conventions
- Shared window for pair metrics
- 2025-02-27 → 2026-02-25 (last shared close).
- Rolling correlation sample (shared closes)
- 227 rolling 30-day values (from 256 shared daily returns).
- Annualization (days/year)
- BTC: 365 days/year; XAU: 252 days/year.
- Risk-free rate
- Uses the 3-month U.S. Treasury yield (FRED: DGS3MO), averaged over each asset’s window:
- BTC: 4.20% over 2025-02-26 → 2026-02-25.
- XAU: 4.20% over 2025-02-27 → 2026-02-25.
- Volatility drag (rule of thumb)
- Estimated from annualized volatility (simple returns). For the log-return framing, see Log returns.
- BTC: ≈ -10.4%/yr
- XAU: ≈ -3.2%/yr
- Data alignment
- No forward fill. Correlation and tail co-moves are computed on shared closes only. For cross-calendar pairs (e.g., crypto vs stocks), weekend/holiday moves roll into the next shared close.
- Return conventions
- Volatility/Sharpe/Sortino use simple daily returns. Tail-risk uses daily log returns for distribution stats (but tables show simple returns). Log returns.
Formulas
- Price on day t.
- Simple daily return.
- Log daily return.
- Average daily return.
- Standard deviation of daily returns.
- Annualization factor (days/year).
- Annual risk-free rate.
Bitcoin vs Gold: Frequently Asked Questions
Which has higher volatility: BTC or XAU?
BTC showed higher volatility at 45.6% annualized, compared to 25.1% for XAU Over the past year. Higher volatility means larger price swings in both directions.
Does BTC provide diversification when held with XAU?
BTC and XAU are weakly correlated over the past year, with an average correlation of 0.11. This weak correlation suggests meaningful diversification benefits when held together.
How bad are the worst 5% days for BTC vs XAU?
Over the past year, BTC's 5% VaR was -3.80% and its 5% Expected Shortfall was -5.71% (worst 19 days). XAU's were -2.26% and -3.79% (worst 13 days).
Do BTC and XAU crash together on bad days?
On shared dates (n=256), when XAU has a 2σ down day, BTC also does 16.7% (1/6 days). In the other direction, when BTC has one, XAU also does 12.5% (1/8 days).
Which has better risk-adjusted returns: BTC or XAU?
BTC had a negative Sharpe (-0.32) while XAU was positive (2.26) Over the past year, indicating XAU had meaningfully better risk-adjusted performance.
Can BTC and XAU be combined in a portfolio?
Yes, though allocation sizing matters. Their weak correlation could meaningfully reduce overall portfolio variance. BTC's higher volatility (45.6%) means even small allocations can materially impact overall portfolio risk.