In a world of ballooning deficits, fading faith in central banks and collapsing bond-market logic, bitcoin is moving from the fringe into portfolios once ruled by gold and long-duration debt.
According to Ryan McMillin, co-founder and chief investment officer of Merkle Tree Capital, long bonds are “rapidly becoming uninvestible”, with bitcoin increasingly taking on that role as more macro investors turn to cryptocurrency to hedge against erosion of purchasing power.
“If governments can’t balance their budgets, the traditional 60/40 portfolio is effectively dead, this portfolio worked well for the 40-year bond bull market but this is over,” McMillin told InvestorDaily.
“As we now enter a similar inflationary regime [to the 1970s and 1980s], both gold and bitcoin are poised to earn a lasting role – perhaps in a 60/20/20 or similarly rebalanced portfolio structure.”
Highlighting concerns over bitcoin’s volatility, McMillin said these are no longer fair particularly as volatility has declined steadily and now matches or falls below that of the Mag 7 tech stocks.
“The volatility argument needs to be reassessed, both in terms of current levels and the clear downward trend,” he said, adding that “bitcoin is a macro asset, like gold”.
“Its primary price driver is global money supply growth (M2). And M2 is climbing sharply, driven by unchecked government deficits – with no signs of slowing. In this environment, hard assets tend to perform well, and bitcoin with nearly double the sensitivity (beta) to M2 compared to gold, the next best asset,” McMillin added.
Rachael Lucas, cryptocurrency analyst at BTC Markets, highlighted bitcoin’s edge over gold due to its limited supply, decentralised issuance and global liquidity – qualities that “resonate in periods of monetary expansion or geopolitical risk”.
“Whereas gold often reflects a hedge against inflation and currency debasement, bitcoin may be viewed by some investors as a hedge against the broader fragility of fiat systems,” Lucas said.
“That said, its correlation profile can vary over time, and it still reacts to liquidity flows like a risk asset.”
Her view is that bitcoin is not replacing gold or long bonds in investor portfolios but rather serving as “a complementary hedge” with different stress-response characteristics.
Lucas expects bitcoin to continue to gain on the back of interest rate expectations, liquidity conditions and geopolitical risk.
“We’re currently in an environment where talk of rate cuts, especially from figures like Trump, is reintroducing risk appetite across markets,” she told InvestorDaily.
“Bitcoin, with its high sensitivity to global liquidity flows, tends to respond strongly in those periods. At the same time, geopolitical tensions are renewing interest in assets that sit outside traditional monetary systems.
“These two forces, monetary policy speculation and geopolitical uncertainty, are currently the most influential drivers.”
What role have ETFs played in mitigating risk around bitcoin?
Like McMillin, Lucas argued that the narrative around bitcoin as a speculative asset has shifted, driven largely by the rise of exchange-traded funds (ETF), with an increasing number of investors now treating it as a strategic allocation.
Factors such as institutional-grade access, transparent pricing and custody standards have “opened the door for fund managers and asset allocators to explore position sizing, portfolio correlations, and downside protection in ways that align with broader risk frameworks,” Lucas said.
She added that while this does not render bitcoin risk-free, it does make the cryptocurrency “easier to frame within the context of diversified portfolios and macro exposure management”.
Mena Theodorou, co-founder of cryptocurrency exchange Coinstash, agreed that ETFs are making bitcoin far more accessible and compliant for traditional investors and corporations.
“By offering regulated, custodial exposure to BTC, ETFs allow institutions to include bitcoin in portfolios through familiar investment structures,” Theodorou said in conversation with InvestorDaily.
“This helps shift the narrative from bitcoin being a speculative asset to one that plays a legitimate role in portfolio diversification and risk management.”
Ultimately, Lucas also pointed to emerging signs that private institutions are beginning to treat bitcoin as a reserve-like asset, providing a separate source of support for its price.
“There are signs that private institutions are starting to approach bitcoin through a reserve-like lens,” Lucas said. “We’ve seen treasury allocations from corporates, the rise of ETF products for institutional flows and growing interest from wealth managers.”
Theodorou agreed, noting the trend gained momentum in 2024, when early adopters began adding bitcoin to their balance sheets.
“What started with a handful of pioneering firms like Michael Saylor’s strategy allocating bitcoin to their balance sheets has grown into a more widespread trend,” he said.
“With the launch of spot ETFs and growing institutional infrastructure, we’re now seeing the momentum build. It does feel like we’re in the early innings of a much larger wave of adoption.”
A generational shift in trust
Another factor working in bitcoin’s favour is its growing appeal as the hedge of choice for a generation increasingly disillusioned with central banks and traditional monetary authorities.
“For a digitally native generation raised in an online world and increasingly distrustful of traditional financial institutions, bitcoin isn’t just an alternative, it’s the obvious choice,” Theodorou said.
“Its decentralised and transparent nature, combined with its independence from any central bank or government, makes it uniquely positioned as a modern store of value.”
McMillin added that what sets bitcoin apart from central banks is its fully transparent and immutable monetary policy, with its supply programmed to halve every four years. By contrast, he said, central banks can’t reliably project even two years ahead.
“We all remember ‘no rate rises until 2024’. Today, forward guidance is gone, replaced by ‘data dependence’ – which roughly translates to ‘we have no idea’. Yet, they continue to overlook the elephant in the room: unsustainable government spending as a structural driver of inflation.”
Bitcoin’s price stood at US$111,412 as at 5pm (AEDT).
