Cite This Comparison
"Bitcoin vs Gold (BTC vs XAU): Returns, Risk & Volatility (2022)." Gale Finance, December 31, 2022. https://www.gale.finance/compare/btc-vs-xau-2022 Free to use with attribution. Please link back to this page or gale.finance.
Analysis period: 2022-01-01 to 2022-12-31
Relative Performance of BTC vs XAU (Normalized to 100)
Normalized to 100 at start date for comparison
Key Takeaways
- Total Return: BTC delivered a -64.3% total return, while XAU returned +1.2% over the same period. XAU outperformed on total returns.
- Risk-Adjusted Return (Sharpe Ratio): Both Sharpe ratios were negative (XAU -0.15 vs BTC -1.38), meaning both underperformed the risk-free rate; XAU was less negative.
- Volatility (Annualized): BTC was more volatile, with 63.8% annualized volatility, versus 14.8% for XAU.
- Maximum Drawdown: XAU's maximum drawdown was -20.8%, while BTC experienced a deeper drawdown of -66.7%.
Bitcoin vs Gold Correlation
Bitcoin and Gold were weakly correlated in 2022. With a correlation of 0.17, these assets showed 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 | Metric | Value |
|---|---|---|
| Current (30-day) | 0.36 | |
| Average (full period) | 0.17 | |
| Minimum | -0.46 | |
| Maximum | 0.65 |
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 January 1, 2022:
Difference: $6,549.354 (XAU ahead)
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Bitcoin and Gold: Risk Analysis
Bitcoin experienced its maximum drawdown of -66.7% from 2022-03-29 to 2022-11-21. It has not yet recovered to its previous peak.
Gold experienced its maximum drawdown of -20.8% from 2022-03-08 to 2022-09-26. 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. Both Sharpe ratios were negative (XAU -0.15 vs BTC -1.38), meaning both underperformed the risk-free rate; XAU was less negative.
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 penalizes negative volatility. XAU had better downside-adjusted returns.
A higher Sortino is better. It's particularly useful for assets with asymmetric volatility (big gains, smaller losses). Downside volatility: BTC 49.5% vs XAU 9.5%. 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).
Full Comparison of Bitcoin vs. Gold (2022)
| Metric | BTC | XAU |
|---|---|---|
| Total Return | -64.3% | +1.2% |
| Annualized Volatility | 63.8% | 14.8% |
| Sharpe Ratio | -1.38 | -0.15 |
| Sortino Ratio | -1.78 | -0.23 |
| Max Drawdown | -66.7% | -20.8% |
| Avg Correlation to S&P 500 | N/A | N/A |
Bitcoin vs Gold: Frequently Asked Questions
Which had higher volatility: BTC or XAU?
BTC showed higher volatility at 63.8% annualized, compared to 14.8% for XAU During 2022. Higher volatility meant larger price swings in both directions.
Did BTC provide diversification when held with XAU?
BTC and XAU were weakly correlated in 2022, with an average correlation of 0.17. This weak correlation suggested meaningful diversification benefits when held together.
Which had better risk-adjusted returns: BTC or XAU?
Both assets posted negative Sharpe ratios During 2022 (XAU -0.15 vs BTC -1.38), meaning both underperformed the risk-free rate; XAU was less negative.
Could BTC and XAU have been combined in a portfolio?
Yes, though allocation sizing mattered. Their weak correlation could have meaningfully reduced overall portfolio variance. BTC's higher volatility (63.8%) meant even small allocations can materially impact overall portfolio risk.