Bitcoin's Sharpe ratio converges with gold's, indicating similar risk-adjusted returns, supporting its store-of-value role.

Bitcoin’s Sharpe ratio converges with gold’s, indicating similar risk-adjusted returns, supporting its store-of-value role.

Key takeaways:

* Bitcoin’s Sharpe ratio converges with gold’s, indicating similar risk-adjusted returns, supporting its store-of-value role.

* Gold outperformed Bitcoin in Q1 2025 with a 30.33% price gain versus Bitcoin’s 3.84%, driven by economic uncertainty.

* Bitcoin ETF inflows are recovering, and analysts predict BTC could reach $110,000–$444,000 in 2025.

Bitcoin’s (BTC) price is holding above $100,000, leading Fidelity Director of Global Macro, Jurrien Timmer, to say that the crypto asset could be reclaiming its position as a leading store-of-value contender.

According to his recent analysis, the Sharpe ratios of Bitcoin and gold are converging, suggesting that the two assets are increasingly comparable in risk-adjusted returns. The Sharpe ratio measures the rate of return an investment provides for the risk taken. It compares an investment's performance to a risk-free benchmark relative to its volatility.

The chart below, tracking weekly data between 2018 and May 2025, shows Bitcoin’s returns (1x) catching up to gold’s (4x), with gold at $22.48 and Bitcoin at $15.95 in relative performance terms.

From an allocation standpoint, a 4:1 gold-to-Bitcoin ratio is recommended for a store-of-value hedge, highlighting an intriguing observation.

“After the 2018 crypto winter, it took Bitcoin about 4 years to fully recover to new all-time highs (ATHs) in May 2022. In contrast, after the 2020 corona crisis, gold took less than a year to reach new highs. This suggests that Bitcoin might be a more "risky" asset class than gold, at least in terms of the time it takes to recover from a steep market downturn.”

While Bitcoin’s SoV credential improves above $100,000, Ecoinometrics, a Bitcoin-focused macroeconomic newsletter, pointed out that it was not smooth sailing in Q1 2025.

In 2024, Bitcoin spot exchange-traded traded-funds (ETFs) saw a staggering $35 billion net inflows, purchasing 500,000 BTC and driving a 120% return. However, 2025 started on a different note. The first four months saw Bitcoin ETF flows drop to less than a third compared to 2024, and gold ETFs attracted more capital.

The newsletter noted that this shift could be attributed to Q1 uncertainty surrounding Federal Reserve policy, trade policy, and the US economy. Ecoinometrics stated, “With more good news than bad news in Q1 2025, and a 30.33% price gain for gold in 2025 compared to a 3.84% gain for Bitcoin, it’s no surprise that investors preferred the stability of gold during this period of economic unease.”

According to the analysis, Bitcoin performed better as a “high-beta growth asset,” thriving in rising liquidity and fiat debasement environments.

However, recent developments signal a shift: US trade policy clarity, a softer Federal Reserve stance, and easing financial conditions have spurred steady inflows into Bitcoin ETFs.

A higher Sharpe ratio is a positive metric for Bitcoin, significantly increasing the probability of reaching new all-time highs above $110,000 in May. According to Bitcoin Suisse, a crypto custody firm, BTC’s high Sharpe ratio has allowed the asset to thrive in risk-on and risk-off environments since the US presidential election.

With more than 88% of its supply in profit, BTC currently behaves as a high-conviction bet, where the likelihood of an “acceleration phase” moving forward.

“We can say that Bitcoin has a decent chance of reaching $250,000 or more in 2025,” reads a recent report by crypto analysts at Ecoinometrics. The analysis focuses on Bitcoin’s interplay with gold and utilizes a gold-based forecast to project the potential revaluation of non-sovereign hard assets.

If Bitcoin’s network value, measured in gold, follows a power curve, and gold maintains its current value, analysts suggest it could hit $444,000 in 2025. However, a more conservative estimate by Bitcoin analyst Apsk32 points to a "reasonable" target of $220,000 for the year.