When the market declines, gold acts as a shield; during rebounds, Bitcoin serves as a spear.

Written by: Juan Leon, Mallika Kolar

Translated by: AididiaoJP

The continued devaluation of the US dollar has led many investors to consider whether to allocate assets to gold or Bitcoin. Historical experience suggests they might be better off holding both.

Ray Dalio, founder of Bridgewater Associates and one of the most influential figures in hedge fund history, recently made headlines by recommending that investors allocate 15% of their portfolios to gold and Bitcoin.

What is his reasoning? The soaring federal debt and persistent deficit spending indicate that the dollar will continue to depreciate. This environment makes it increasingly important to hold assets that can enhance portfolio resilience and hedge against purchasing power loss.

Naturally, this caught our attention. So, we decided to stress-test Dalio’s advice. We analyzed major market downturns over the past decade, examining a traditional 60/40 investment portfolio (60% stocks, 40% bonds) and several variants, including allocations of 15% to Bitcoin, gold, or both.

The results are very interesting: in all cases, holding both gold and Bitcoin outperformed holding either one alone, making them one of the strongest complements to the traditional 60/40 portfolio.

“Buffer” and “Spring”

Looking back at each major stock market decline over the past decade—2018, 2020, 2022, and the trade war of 2025—gold provided a good buffer during market corrections.

In 2018, due to escalating US-China trade tensions, concerns over global economic slowdown, and hawkish Federal Reserve policies, the stock market plunged 19.34%. Bitcoin also fell sharply, down 40.29%. In contrast, gold rose by 5.76%.

In 2020, the COVID-19 pandemic caused the global economy to stall, leading to a 33.79% decline in stocks. Bitcoin again fell significantly, down 38.10%. Gold also declined but by only 3.63%.

The market decline in 2022 was driven by multiple factors, including spiraling inflation, aggressive Fed rate hikes, and supply chain issues leftover from COVID-19. The market reacted strongly, with stocks dropping 24.18%. Bitcoin performed worse, with a decline of 59.87%, due to the unique complexities following the FTX bankruptcy. Gold performed noticeably better, declining only 8.95%.

In 2025, as the market retreated following President Trump’s announcement of tariffs and trade war escalation, a similar pattern emerged. Stocks fell 16.66%, Bitcoin dropped 24.39%, while gold rose 5.97%.

So, should you only hold gold and abandon Bitcoin? Not so fast. Let’s see what happened during market recoveries:

After bottoming out at the end of 2018, the stock market rose 39.89% over the following year. Gold increased by 18.14%, and Bitcoin surged by 78.99%.

In 2020, after the large-scale government stimulus plans calmed the panic caused by COVID-19, the stock market rebounded 77.80%, gold rose 111.92%, and Bitcoin rebounded dramatically by 774.94%.

In 2023, as inflation declined and expectations of the Fed turning to rate cuts grew, stocks increased by 22.82%, gold climbed 17.53%, and Bitcoin rose nearly 40.16%.

Since the market recovered from the 2025 trade war panic, stocks have gained 38.65%, and gold soared 44.79%. Bitcoin currently lags behind both, with a gain of only 14.04%; however, the recovery period extends until April 2026, giving Bitcoin several more months to regain the lead.

What is the key conclusion? If history is any guide, you should hold gold during market downturns and Bitcoin during recoveries.

Viewing the Full Cycle

Looking at these data, it seems obvious what to do: hold gold as the market declines, then precisely switch to Bitcoin at the bottom. But of course, that’s impossible. In reality, if you could predict a downturn, the best approach would be to completely exit the market, selling all assets including stocks.

A more practical approach is to consider performance over the entire cycle. And here, the data is conclusive: historically, combining gold and Bitcoin offers the best balance between buffering market shocks and enhancing recovery returns. Statistically speaking, a portfolio containing both gold and Bitcoin has a Sharpe ratio of 0.679, nearly three times the 0.237 of a traditional portfolio, and much higher than a gold-only portfolio at 0.436. While a Bitcoin-only portfolio (excluding gold) has the highest Sharpe ratio at 0.875, its volatility is also significantly higher than that of the gold/Bitcoin combination.

Performance of portfolios with gold, Bitcoin, and both

Source: Bitwise Asset Management, data from Bloomberg. Note: The “one-year after decline” and “full cycle” metrics include the complete 12-month periods following the declines in 2018, 2020, and 2022. These metrics do not include the cycle after the 2025 decline.

By holding both assets throughout the entire cycle, portfolios can benefit from gold’s defensive qualities during market declines and Bitcoin’s offensive potential during rebounds. The question of gold versus Bitcoin is often framed as an either/or choice. As the data shows, historically, the best answer is “both.”