Is bitcoin the new digital gold?

Is bitcoin the new digital gold? Ten years after the seminal work of Satoshi Nakamoto in 2008, at which time he introduced the bitcoin, a heated debate has started about this matter, and a wide audience has participated, including academics, practitioners (asset managers, financial advisors and investors) and journalists in the financial press. Although bitcoin and gold are two basically different assets in several respects (free of sovereign risk and independent from regulatory authorities), their statistical behavior leads us to consider if bitcoin – similarly to gold – could provide diversification benefits during downside market conditions. Such market conditions are a primary concern for investors.

To contribute to the current debate for the role of bitcoin as a new digital gold, we examine the potential benefits of bitcoin during extremely volatile periods in financial markets, using the multivariate extreme value theory. This statistical theory is the appropriate approach to model the tail dependence structure.

Our findings showed that bitcoin can be considered as the new digital gold. However, gold is still important in an equity portfolio. To the question: “Is bitcoin the new digital gold?” we answer that both bitcoin and gold are the best choices.

Gkillas, K. and Longin, F. (2018). Is Bitcoin the New Digital Gold? Evidence from Extreme Price Movements in Financial Markets.


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