Bitcoin and Gold as Alternative Investment Assets: Returns, Volatility, and Portfolio Diversification Benefits
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Through this study, I examine how Bitcoin and spot gold compare as alternative investment assets within modern financial portfolios. Traditional asset allocation relies heavily on equities and fixed-income securities, but macroeconomic instability, inflation, and shifting central bank policies have driven investors toward alternative stores of value. I conducted an empirical comparative study over a ten-year period (January 2015 to December 2024), analyzing 2,518 daily market observations across Bitcoin, spot gold, and the S&P 500 stock index. I evaluated five primary performance indicators: annualized return, annualized volatility, Sharpe ratio, equity market correlation, and maximum drawdown during market downturns. The results indicate a significant operational contrast between the two assets. Bitcoin demonstrated exponential capital growth with an annualized return of 64.2%, but suffered extreme annualized volatility of 68.5% and a maximum drawdown of -77.3%. Conversely, gold provided steady, defensive performance with an annualized return of 6.8%, an annualized volatility of 14.2%, and a near-zero correlation (+0.04) with the S&P 500 during market crashes. The implications suggest that while Bitcoin functions primarily as a high-beta growth driver, gold remains the superior safe-haven asset for portfolio protection and risk mitigation.
Keywords
Alternative Assets, Bitcoin, Gold, Portfolio Diversification, Safe Haven, Volatility