Cite This Comparison
"Bitcoin vs Gold (BTC vs XAU): Returns, Risk & Volatility (2023)." Gale Finance, December 31, 2023. https://www.gale.finance/compare/btc-vs-xau-2023 Free to use with attribution. Please link back to this page or gale.finance.
Analysis period: 2023-01-01 to 2023-12-31
Relative Performance of BTC vs XAU (Normalized to 100)
Normalized to 100 at start date for comparison
Key Takeaways
- Total Return: BTC delivered a +155.4% total return, while XAU returned +12.2% over the same period. BTC outperformed on total returns.
- Risk-Adjusted Return (Sharpe Ratio): BTC had a higher Sharpe (2.28 vs 0.59), indicating better risk-adjusted performance.
- Volatility (Annualized): BTC was more volatile, with 44.0% annualized volatility, versus 13.1% for XAU.
- Maximum Drawdown: XAU's maximum drawdown was -11.2%, while BTC experienced a deeper drawdown of -20.1%.
Bitcoin vs Gold Correlation
Bitcoin and Gold were weakly correlated in 2023. With a correlation of 0.05, 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) | -0.12 | |
| Average (full period) | 0.05 | |
| Minimum | -0.56 | |
| Maximum | 0.46 |
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, 2023:
Difference: $14,324.14 (BTC ahead)
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Bitcoin and Gold: Risk Analysis
Bitcoin experienced its maximum drawdown of -20.1% from 2023-07-13 to 2023-09-11. It has not yet recovered to its previous peak.
Gold experienced its maximum drawdown of -11.2% from 2023-05-04 to 2023-10-05. 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 higher Sharpe (2.28 vs 0.59), indicating better risk-adjusted performance.
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. BTC 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 26.1% vs XAU 7.7%. 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 (2023)
| Metric | BTC | XAU |
|---|---|---|
| Total Return | +155.4% | +12.2% |
| Annualized Volatility | 44.0% | 13.1% |
| Sharpe Ratio | 2.28 | 0.59 |
| Sortino Ratio | 3.85 | 0.99 |
| Max Drawdown | -20.1% | -11.2% |
| 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 44.0% annualized, compared to 13.1% for XAU During 2023. Higher volatility meant larger price swings in both directions.
Did BTC provide diversification when held with XAU?
BTC and XAU were weakly correlated in 2023, with an average correlation of 0.05. This weak correlation suggested meaningful diversification benefits when held together.
Which had better risk-adjusted returns: BTC or XAU?
BTC showed better risk-adjusted performance with a Sharpe ratio of 2.28 versus XAU's 0.59 During 2023.
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 (44.0%) meant even small allocations can materially impact overall portfolio risk.