Bitcoin’s role as portfolio hedge in doubt after historic crypto crash

Bitcoin’s claim as a Wall Street hedge took a hard hit this week after the crypto market crashed in what traders called one of the most violent selloffs since 2022, according to Bloomberg.

The OG crypto that investors once treated as “digital gold” slumped as over $19 billion in leveraged positions were wiped out within 24 hours, the largest single-day liquidation in history of the market.

The crash was so huge it dragged Bitcoin from about $125,000 all the way to $102,000 in matter of hours, exposing how closely Satoshi’s dream still moves with risky assets instead of acting as a shield against them.

For most of this year, Bitcoin was thriving on a new narrative. Exchange‑traded funds were attracting billions, and Wall Street giants were pouring in.

BlackRock’s iShares Bitcoin Trust (IBIT) had grown to $91 billion in assets, trailing the SPDR Gold Shares (GLD) fund’s $136 billion, a symbolic race that investors said would prove whether crypto actually could rival gold as a store of value.

That race is now over for the moment. Gold has reclaimed its dominance while Bitcoin’s safe‑haven credentials look weaker than ever.

Gold rallies after Trump’s China tariff warning

President Donald Trump’s new tariff threat against China sent investors scrambling for cover. Gold surged past $4,200 an ounce today, its highest level ever recorded, while Bitcoin fell in tandem with equities and oil.

The selloff showed again that the token’s price still depends heavily on risk appetite and leverage rather than fear or capital preservation.

“I have never considered Bitcoin a safe haven. I have always believed it to be a speculative risk asset,” said Michael O’Rourke, chief market strategist at Jonestrading. Gold’s centuries‑long reputation as a store of value remains intact. I mean, GLD stands above $130 billion in assets, IBIT hovers near $91 billion, and investors are again turning to bullion when volatility spikes.

Even when volatility is factored in, gold is beating Bitcoin. The Sharpe ratio, which tracks risk‑adjusted returns, shows gold at 3 as of October 14, its highest in a year. Bitcoin has dropped to 1.91, down from 3.68 in January. Gold’s gains are steadier, while Bitcoin’s are fueled by momentum that vanishes once markets panic.

Analysts call gold the new Bitcoin amid liquidity crunch

Market veteran Ed Yardeni, head of Yardeni Research, told clients on Wednesday that “Gold is the new Bitcoin.” He wrote that investors now view gold as “physical Bitcoin,” a more reliable hedge against rising geopolitical tension.

Yardeni pointed out that while both assets posted strong returns this year, gold leads by a wide margin, jumping 60 percent in 2025 compared with Bitcoin’s 20 percent rise.

Gold’s strength over the last month is striking, up 13 percent, while Bitcoin fell 3 percent. Over the past week alone, gold gained 4 percent as Bitcoin plunged 9 percent and the Nasdaq Composite slipped 1 percent, a reminder that the token continues to trade like a tech stock rather than a hedge. Yardeni expects gold to hit $5,000 in 2026 and possibly $10,000 by the end of the decade.

Yardeni blamed Bitcoin’s slide on liquidity pressure. He said exchanges triggered auto‑deleveraging to limit damage as markets collapsed, forcing even profitable or hedged traders to close positions to protect balance sheets. Market makers stepped back, spreads widened, and there were no buyers strong enough to absorb the avalanche of sell orders.

Meanwhile, gold’s rally was helped by Trump’s tariff threats, as traders sought protection from policy shocks and global instability. Yardeni said, “Investors seeking protection from mounting geopolitical risks have been heading for the hills to mine for gold as well as for silver.”

Bitcoin enthusiasts argue that institutional participation through ETFs proves the asset’s maturity and that the crash is temporary. Critics counter that as long as Bitcoin behaves like a high‑beta stock, its dream of becoming a hedge remains fantasy.

The numbers leave little doubt. Gold funds continue to draw steady inflows as part of what traders call the “debasement trade,” while Bitcoin’s momentum has cooled. The token may still be the poster child of speculative finance, but for investors looking for safety in Trump’s world of tariffs, inflation worries, and geopolitical friction, gold is back in charge.

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.