Bitcoin's Vulnerability in a Risk-Off Environment: Re-Evaluating Its Role as a High-Beta Asset

Bitcoin has long been marketed as a "digital gold" or a hedge against macroeconomic uncertainty. Yet, as the 2020s have unfolded, the data tells a different story. Over the past five years, Bitcoin has increasingly behaved as a high-beta asset—sensitive to market cycles and prone to sharp declines during risk-off periods—rather than a true safe-haven asset. This shift has profound implications for investors seeking diversification in volatile markets.

The Beta of Bitcoin: A Risk-On Paradox

Bitcoin’s beta coefficient—a measure of its volatility relative to the broader market—has surged to 2.21 in 2023–2025, according to a study by Hashkey Capital [2]. This means Bitcoin swings twice as much as the S&P 500 during market downturns. For context, traditional equities typically have a beta of 1.0, while high-growth tech stocks hover around 1.5. Bitcoin’s elevated beta suggests it amplifies market movements rather than dampening them.

This pattern became starkly evident during the 2020 pandemic and the 2025 trade war. In both cases, Bitcoin plummeted alongside equities. For example, during the initial stages of the 2020 lockdowns, Bitcoin and the S&P 500 both dropped over 50% within months [5]. Similarly, in early 2025, as global inflation and tariff tensions spiked, Bitcoin fell 40% in a matter of weeks, mirroring the S&P 500’s trajectory [2].

Gold vs. Bitcoin: Divergent Safe-Haven Roles

Gold, by contrast, has maintained its reputation as a reliable store of value during crises. In 2025, as trade war anxieties and inflation concerns peaked, gold prices hit record highs, outperforming both Bitcoin and the S&P 500 [1]. This divergence underscores a critical difference: gold’s value is rooted in its historical role as a hedge against currency devaluation and geopolitical instability, whereas Bitcoin’s price remains tethered to risk-on sentiment.

Data from SP Global further highlights this contrast. While Bitcoin’s correlation with U.S. 10-year Treasury yields has remained weak since 2014 [3], gold has consistently moved inversely to yields during periods of dollar weakness. This dynamic reinforces gold’s status as a traditional safe haven, even as Bitcoin’s correlations with equities have strengthened.

The 2025 Rebound: A False Dawn?

Bitcoin’s 30.7% surge in Q2 2025—its highest quarterly gain since the post-COVID rebound—might suggest a shift toward safe-haven status [2]. However, this rally was driven by macroeconomic optimism, not risk-off demand. The asset’s 0.48 correlation with U.S. equities during this period [2] indicates it still behaves as a leveraged bet on market conditions rather than a counter-cyclical hedge.

Moreover, Bitcoin’s structural idiosyncrasies—such as its finite supply and decentralized nature—do not translate to consistent safe-haven behavior. During the 2020 pandemic’s early stages, Bitcoin fell alongside equities despite its supply constraints [4]. This highlights a critical flaw: Bitcoin’s perceived scarcity does not insulate it from liquidity-driven sell-offs in risk-off environments.

Institutional Integration and the Beta Amplifier

The rise of crypto derivatives and institutional adoption has further amplified Bitcoin’s beta characteristics. As more investors treat Bitcoin as a speculative asset rather than a store of value, its price becomes increasingly sensitive to macroeconomic signals. For instance, Bitcoin’s sharp declines in 2023 and 2024 coincided with Fed rate hikes, mirroring equities’ response to tightening monetary policy [5]. This suggests Bitcoin is now priced as a risk asset, not a hedge.

Conclusion: A High-Beta Asset in Disguise

Bitcoin’s evolution from a non-correlated asset to a high-beta player has reshaped its role in portfolios. While its structural properties—like scarcity—suggest potential as a hedge, its behavior during market stress reveals a deep entanglement with risk-on dynamics. For investors, this means Bitcoin should be treated as a leveraged exposure to equities, not a standalone safe-haven asset.

As the 2020s progress, the line between Bitcoin and traditional equities will blur further. Those seeking true diversification may find gold and U.S. Treasuries more reliable during stagflationary periods. Bitcoin, for now, remains a high-risk, high-reward bet on the broader market’s health.

Source:
[1] Gold Prices Rally to Record High Amid Trade War and ... [https://discoveryalert.com.au/news/gold-record-rally-2025-trade-war-tensions/]
[2] Why Bitcoin's Relationship with Equities Has Changed [https://www.institutionalinvestor.com/article/sponsored-content/why-bitcoins-relationship-equities-has-changed]
[3] Cryptocurrency signals: Bitcoin pricing factors [https://www.spglobal.com/market-intelligence/en/news-insights/research/cryptocurrency-signal-bitcoin-pricing-factors]
[4] What a Recession in 2025 Means for Your Crypto Portfolio [https://tangem.com/en/blog/post/recession-and-crypto/]
[5] How The Fed Impacts Stocks, Crypto And Other Investments [https://www.bankrate.com/investing/federal-reserve-impact-on-stocks-crypto-other-investments/]