Written by: Juan Leon, Mallika Kolar
Compiled by: AididiaoJP
The persistent depreciation of the U.S. dollar has led many investors to ponder whether to allocate to gold or Bitcoin. Historical experience suggests they might be wise to hold both.
Ray Dalio, founder of Bridgewater Associates and one of the most influential figures in hedge fund history, recently made headlines by stating that investors should allocate 15% of their portfolios to gold and Bitcoin.
His reasoning? Soaring federal debt and persistent deficit spending signal a continued devaluation of the dollar. This environment makes it increasingly important to hold assets that can enhance portfolio resilience and protect against loss of purchasing power.
This naturally caught our attention. So we decided to stress-test Dalio's suggestion. We analyzed major market downturns over the past decade, examining a traditional 60/40 portfolio (60% stocks, 40% bonds) and several variations, including allocations of 15% to Bitcoin, gold, or both simultaneously.
The results were fascinating: In all scenarios, the combination of gold and Bitcoin working together was more effective than holding either one alone, forming one of the most powerful complements to the traditional 60/40 portfolio.
The "Cushion" and the "Spring"
Looking at every major stock market decline over the past decade – 2018, 2020, 2022, and the 2025 tariff war – gold provided a strong cushion against the pullbacks.
In 2018, stocks plunged 19.34% due to escalating U.S.-China trade tensions, concerns about a global economic slowdown, and the Fed's hawkish monetary policy. Bitcoin also fell sharply, down 40.29%. In contrast, gold rose 5.76%.
In 2020, the COVID-19 pandemic brought the world economy to a halt, causing stocks to fall 33.79%. Bitcoin again fell significantly, down 38.10%. Gold also declined, but only by 3.63%.
The 2022 market decline was driven by a mix of factors, including spiraling inflation, aggressive Fed rate hikes, and lingering supply chain issues from the pandemic. The market reaction was severe, with stocks falling 24.18%. Bitcoin fared worse, plummeting 59.87% due to the unique complications from the FTX collapse. Gold significantly outperformed both, declining only 8.95%.
In 2025, a similar pattern emerged when the market pulled back following President Trump's announcement of new tariffs and an escalation of the trade war. Stocks fell 16.66%, Bitcoin fell 24.39%, while gold rose 5.97%.
So, should one just hold gold and forget Bitcoin? Not so fast. Look at what happened when the markets recovered:
After bottoming in late 2018, stocks rose 39.89% over the following year. Gold gained 18.14%, while Bitcoin surged 78.99%.
In 2020, after the announcement of massive government stimulus calmed the COVID-induced panic, stocks rebounded 77.80%, and gold advanced 111.92%. Bitcoin, however, skyrocketed 774.94%.
In 2023, as inflation fell and expectations grew for a Fed pivot to rate cuts, stocks rose 22.82%, and gold climbed 17.53%. Bitcoin gained nearly 40.16%.
Since the recovery from the 2025 tariff scare began, stocks have risen 38.65%, while gold has jumped 44.79%. Bitcoin is currently trailing both, up only 14.04%; however, the one-year recovery period does not end until April 2026, leaving Bitcoin months to potentially regain the lead.
The key takeaway? If history is any guide, you want to own gold going into the downturn and Bitcoin coming out of it.
Looking at the Full Cycle
Looking at this data, it's easy to think the path is obvious: hold gold right into the downturn, then pivot perfectly to Bitcoin the moment the market bottoms. But that's impossible, of course. In fact, if you knew a downturn was imminent, the best move would be to exit the market entirely, selling everything, including stocks.
A more practical approach is to consider performance across the entire cycle. And here, the data is conclusive: Historically, adding both gold and Bitcoin provided the best balance between cushioning the blow during the market drawdown and enhancing returns during the recovery. To put it statistically, a portfolio including both gold and Bitcoin had a Sharpe Ratio of 0.679, nearly triple the traditional portfolio's Sharpe of 0.237 and significantly higher than the gold-only (no Bitcoin) portfolio's 0.436. While the Bitcoin-only (no gold) portfolio had the highest Sharpe Ratio (0.875), its volatility was also significantly higher than the gold/Bitcoin combo.
Performance of Portfolios With Gold, Bitcoin, and the Combo
Source: Bitwise Asset Management, data from Bloomberg. Note: The reported "One Year Post-Drawdown" and "Full Cycle" metrics include the full 12-month periods following the 2018, 2020, and 2022 drawdowns. These metrics do not include the period following the 2025 drawdown.
By holding both assets throughout the cycle, the portfolio benefits from gold's defensiveness during the market decline and Bitcoin's offensiveness during the market rebound. The question of gold vs. Bitcoin is often framed as an either/or choice. As the data shows, historically, the best answer has been "both."
