In a detailed analysis presented to clients, asset manager Bitwise has provided quantitative validation for Bridgewater Associates founder Ray Dalio's investment thesis, demonstrating that a portfolio combining Bitcoin and gold significantly outperforms traditional allocations. The research, conducted by Bitwise's Senior Investment Strategist Juan Leon and Quantitative Research Analyst Mallika Kolar under Chief Investment Officer Matt Hougan, found that a 15% combined allocation to Bitcoin and gold produced a Sharpe ratio nearly three times higher than a standard 60/40 portfolio over the past decade.
The analysis specifically tested Dalio's recommendation to use gold or Bitcoin as a hedge against dollar debasement from federal debt and deficit spending. Bitwise used Bloomberg data to examine four major market drawdowns: 2018, 2020, 2022, and 2025. During these periods, gold consistently demonstrated a cushioning effect, while Bitcoin experienced steeper declines than equities before leading recoveries in subsequent years.
Detailed performance data reveals the complementary nature of these assets: In the 2018 drawdown, equities fell 19.34% while Bitcoin dropped 40.29% and gold gained 5.76%. During the 2020 COVID-19 drawdown, equities dropped 33.79%, Bitcoin fell 38.10%, and gold declined 3.63%. The 2022 drawdown saw equities fall 24.18%, Bitcoin drop 59.87%, and gold fall 8.95%. In the 2025 pullback, equities dropped 16.66%, Bitcoin fell 24.39%, and gold gained 5.97%.
The recovery phases highlighted Bitcoin's offensive strength. Following the 2018 downturn, Bitcoin gained 78.99% in the subsequent year while gold rose 18.14%. After the 2020 drawdown, Bitcoin rallied 774.94%, gold gained 111.92%, and equities rebounded 77.80%. Following the 2022 drawdown, Bitcoin rose 40.16%, gold climbed 17.53%, and equities rallied 22.82%. Preliminary data for the ongoing recovery from the 2025 drawdown shows equities up 38.65% from their trough, gold gaining 44.79%, and Bitcoin's recovery trailing at 14.04%, with the full one-year post-drawdown period not concluding until April 2026.
The Sharpe ratio calculations tell the definitive story: A portfolio holding both Bitcoin and gold achieved a Sharpe ratio of 0.679, compared to just 0.237 for a traditional 60/40 portfolio and 0.436 for a portfolio with only gold and no Bitcoin. "Often, the question of gold vs. bitcoin is framed as either/or," Leon and Kolar wrote in the note. "As the data shows, historically the best answer is 'both.'"
The research comes at a critical time for traditional portfolio construction, as the 60/40 model has faced challenges from the "Great Correlation Breakdown" where rising interest rates have caused simultaneous declines in both stock and bond prices. Bitwise's findings position Bitcoin and gold not as speculative alternatives but as essential components for modern risk management, with gold providing defensive stability during drawdowns and Bitcoin offering offensive growth during recoveries.
