An Empirical Analysis of Bitcoin's Volatility Compared to Gold and the S&P 500 (2020–2024)
Abstract
Bitcoin has attracted increasing attention as a digital asset due to its decentralized nature and dramatic price swings. This paper presents an empirical analysis comparing the volatility of Bitcoin with two traditional financial assets—gold and the S&P 500 index—over a five-year period from 2020 to 2024. By computing daily returns and rolling annualized volatility, we demonstrate that Bitcoin exhibits significantly higher and more erratic volatility than either gold or the S&P 500. We further examine how macroeconomic events such as the COVID-19 pandemic, regulatory shifts, and market cycles contribute to volatility. While Bitcoin's volatility shows signs of stabilization, it remains a highly speculative asset compared to more traditional investment vehicles.
Introduction
Since its inception in 2009, Bitcoin has evolved from a niche technological innovation to a mainstream financial asset with a market capitalization exceeding hundreds of billions of dollars. However, unlike traditional assets such as equities or commodities, Bitcoin's price is known for dramatic fluctuations, drawing criticism from skeptics and enthusiasm from high-risk investors. As retail and institutional interest in cryptocurrencies has grown, understanding Bitcoin’s volatility relative to benchmarks like gold (a traditional "safe haven") and the S&P 500 (a measure of equity performance) is crucial for risk-conscious investors. This research seeks to answer: How volatile is Bitcoin, really—and how does this volatility compare to traditional financial assets over time?
Literature Review
A growing body of literature investigates Bitcoin's unique financial characteristics. While early studies (Dyhrberg, 2016) suggested Bitcoin shared hedging properties with gold, others (Baur et al., 2018) emphasized Bitcoin's speculative nature, driven more by sentiment and demand shocks than fundamental value.
The CFA Institute (2024) analyzed historical volatility and found Bitcoin’s realized volatility hovered in the 80th percentile among all traded assets, significantly above blue-chip stocks. iShares (2024) compared Bitcoin to traditional asset classes and reported average annualized volatility of 47% for Bitcoin versus 12% for gold and 10.2% for equities, concluding that Bitcoin remains a high-risk asset.
These findings raise the question of whether Bitcoin’s volatility is a short-term feature or a persistent structural trait.
Data & Methodology
We obtained daily closing price data between January 1, 2020, and December 31, 2024, for:
Bitcoin (BTC-USD): from CoinMarketCap
Gold (GC=F): from World Gold Council
S&P 500 (^GSPC): from Yahoo Finance
This five-year range captures diverse macroeconomic periods: the COVID-19 pandemic, inflationary cycles, post-pandemic recovery, and crypto-specific shocks such as exchange collapses and ETF approval discussions.
We computed daily returns:
\[ r_t = \frac{P_t - P_{t-1}}{P_{t-1}} \]Where \( P_t \) is the closing price on a day. We then calculated a 30-day rolling volatility:
\[ \sigma_{annual} = std(r_{t-29}, ... , r_t) * \sqrt{252} \]This window smooths out noise and annualizes volatility to aid in cross-asset comparison.
Results & Analysis
| Metric | Bitcoin (BTC) | Gold (XAU) | S&P 500 (^GSPC) |
|---|---|---|---|
| Mean Return | 0.0012 | 0.0003 | 0.0004 |
| Std. Dev. (Daily) | 0.0425 | 0.0098 | 0.0115 |
| Maximum Daily Return | +19.87% | +4.56% | +8.97% |
| Minimum Daily Return | −22.78% | −4.12% | −9.45% |
| Average Volatility | 69.8% | 15.3% | 18.7% |
Figure 1: The figure illustrates the 30-day rolling annualized volatility for Bitcoin, gold, and the S&P 500 index from January 2020 to December 2024.
As seen in Figure 1, Bitcoin’s volatility consistently exceeds both gold and the S&P 500 across the five-year period.
Notable Spikes:
March 2020: COVID-19 market crash causes a spike across all three assets.
May 2021: Bitcoin crashes after Tesla suspends BTC payments.
November 2022: FTX collapse drives another surge in crypto market volatility.
2024: ETF discussions and SEC rulings lead to oscillating crypto confidence.
Bitcoin’s volatility profile reflects both the unique structure of the cryptocurrency market and the psychological dynamics of its participants. Unlike traditional assets such as gold or equities, Bitcoin lacks an intrinsic value basis such as dividends, earnings, or physical backing. As a result, its price is highly susceptible to speculative forces and investor sentiment. One notable driver of volatility is the market’s reaction to macroeconomic narratives and regulatory uncertainty. For example, announcements from the U.S. Securities and Exchange Commission regarding the approval or rejection of Bitcoin-based ETFs have caused dramatic short-term swings in its price. Similarly, influential corporate decisions—such as Tesla’s 2021 suspension of Bitcoin payments—have had outsized effects on market perception and price behavior.
Furthermore, Bitcoin’s decentralized and relatively immature ecosystem contributes to its instability. The collapse of major exchanges (e.g., FTX in 2022) or disruptions in network infrastructure can quickly erode investor confidence and lead to abrupt sell-offs. Social media also plays a disproportionately large role in driving market dynamics. Influencers and Twitter threads can spark panic or euphoria, leading to rapid and sometimes irrational price movements. This behavior contrasts with the more regulated and institutionalized trading of gold and the S&P 500, where pricing is generally more stable and anchored to fundamental indicators.
However, some signs point to a maturing Bitcoin market. The growth of derivatives markets, the entry of institutional investors, and the gradual integration of Bitcoin into traditional financial products (such as ETFs and mutual funds) are beginning to introduce liquidity and potentially dampen volatility. Although still significantly more volatile than traditional assets, Bitcoin’s overall volatility has shown signs of gradual decline since its earliest years. This transition suggests that with increased adoption and regulatory clarity, Bitcoin could evolve toward a more stable risk-return profile. Yet, for now, the evidence continues to show that Bitcoin remains a high-risk asset better suited to speculative or small-share portfolio inclusion than to long-term wealth preservation.
Implications for Investors
| Profile | Asset Preference | Rationale |
|---|---|---|
| Risk-averse | Gold or S&P 500 | Historically lower volatility, predictable returns |
| Risk-tolerant | Bitcoin (Small share) | High potential return, hedging speculative risk |
| Portfolio-diverse | Blend w/ BTC <10% | Possible uncorrelated behavior with equities |
Bitcoin is not yet a stable store of value. Though long-term returns can be attractive, its volatility makes it unsuitable as a primary investment for most conservative portfolios.
Limitations & Future Work
This study, while comprehensive in scope, is not without limitations. First, the accuracy and consistency of Bitcoin pricing data can vary across exchanges and data vendors. While we used reputable sources such as CoinMarketCap, minor discrepancies in price feeds and time-zone alignment may introduce noise into volatility estimates. In contrast to centralized equities and commodities trading, the 24/7 nature of cryptocurrency markets can result in misaligned comparisons with assets like gold and the S&P 500, which follow standard trading hours. Although our use of daily closing prices mitigates some of this effect, it may still obscure intra-day dynamics that contribute meaningfully to perceived volatility.
Additionally, the five-year window from 2020 to 2024 contains several “black swan” events, including the COVID-19 pandemic and the high-profile collapse of FTX. While these events provide valuable insights into how Bitcoin responds to crises, they may also skew volatility measures in ways that are not reflective of long-term trends. A more granular analysis using intraday or hourly data, or applying advanced time-series models such as GARCH, could provide more accurate insights into volatility clustering and mean reversion tendencies in Bitcoin’s behavior.
Future work should also explore how volatility differs across other cryptocurrencies, such as Ethereum or stablecoins, to determine whether Bitcoin is an outlier or representative of broader trends in digital assets. Additionally, the inclusion of macroeconomic variables—such as inflation, interest rates, or liquidity measures—could offer a richer framework for understanding volatility drivers. Comparative portfolio backtesting would also be a valuable next step, helping to quantify the impact of Bitcoin’s volatility on risk-adjusted returns when included in diversified investment strategies.
Conclusion
Bitcoin continues to stand apart in the financial landscape due to its unmatched volatility. While its risk profile has somewhat stabilized, it remains significantly more erratic than traditional assets like gold or the S&P 500. For most investors, Bitcoin should remain a speculative slice of a well-balanced portfolio—more of a digital venture capital bet than a substitute for gold.
References
CFA Institute. (2024). Still Misperceived? A Fresh Look at Bitcoin Volatility.
https://blogs.cfainstitute.org/investor/2024/06/12/still-misperceived-a-fresh-look-at-bitcoin-volatilityiShares by BlackRock. (2024). Bitcoin Volatility Guide.
https://www.ishares.com/us/insights/bitcoin-volatility-trendsCoinMarketCap. (2024). Bitcoin Historical Data.
https://coinmarketcap.com/currencies/bitcoin/historical-dataWorld Gold Council. (2024). Gold Price Data.
https://www.gold.org/goldhub/data/gold-pricesYahoo Finance. (2024). S&P 500 Historical Prices.
https://finance.yahoo.com/quote/%5EGSPC/history