Glimmer and Value: Exploring the Behavior, Biases, and Real Worth of Gold and Bitcoin
Investments made by human beings are never isolated. Our decisions are shaped by both psychology and data. According to Tony Robbins, five fundamental forces dictate human behavior: certainty, variety, significance, love and connection, and growth and contribution.
Among these forces, three are especially pertinent to investors:
- Certainty – the desire to evade the distress of financial loss;
- Variety – the thrill of discovering the new; and
- Significance – the drive to excel or be part of something extraordinary.
These factors help explain the diverse ways people interact with markets, prompting some to consider alternatives like gold and bitcoin.
Markets and Behavior
The Efficient Market Hypothesis (1970), put forth by Eugene Fama, argues that assets eventually trade at their fair value as buyers and sellers engage continuously.
This assumption relies on investors having differing perspectives—some viewing assets as undervalued, while others see them as overpriced.
As prices, policies, or growth forecasts shift, uncertainty emerges, leading to varied responses.
Investors prioritizing certainty often act swiftly to minimize risk, whereas those drawn to variety may pursue opportunities through alternative methods. Individuals driven by significance might intentionally invest in unconventional assets to carve out a distinct identity, much like early bitcoin adopters who gained fame as forerunners once their investments succeeded.
Gold: A Timeless Store of Value
Gold has served as currency for centuries, transitioning to the gold standard before underpinning national currencies. In 1944, during the Bretton Woods Agreement, gold supported the global economy, with the US dollar pegged at $35 per ounce. This changed in 1971 when President Richard Nixon ceased convertibility, marking the shift to fiat currencies.
Unlike stocks, bonds, or real estate, gold does not yield cash flow. It eludes valuation based on earnings, income yield, or net asset value. As Howard Marks of Oaktree Capital pointed out in 2010, non-income-generating assets like gold “are valued solely on what buyers are willing to pay.”
While jewelry demand enhances its value, most mined gold remains stored in vaults. This complicates the ability to determine whether current prices reflect fair value, a deal, or a speculative bubble.
Bitcoin: The Digital Challenger
Introduced in 2009, bitcoin is often labeled a “cryptocurrency,” yet it struggles to meet the essential criteria of a currency.
The Reserve Bank of Australia identifies three primary shortcomings:
- Limited Acceptance: Few businesses accept bitcoin as payment;
- Volatile Value: Price swings hinder its role as a store of value; and
- Not a Unit of Account: Goods and services are not priced in bitcoin.
Research supports this assertion. Professor Maggie Chen from Cardiff University found that 85% of bitcoin transactions are conducted by high-frequency trading algorithms rather than regular consumers purchasing goods. Essentially, bitcoin functions more as a speculative asset than as currency.
Correlations and Contradictions
Traditionally, alternative assets were considered to operate independently from the mainstream markets, providing diversification. However, recent findings suggest otherwise.
Alpine Macro (September 2025) noted that speculation affects both gold and bitcoin, showing a near-perfect correlation (0.94) in price movements. Both assets are also closely aligned with the S&P 500, with correlations exceeding 0.9.
This challenges the view that gold or bitcoin act as reliable hedges against uncertainty; rather, their price trends increasingly reflect the broader market’s risk appetite.
Behavioral Drivers in Action
Why do investors continue to gravitate toward these assets?
This links back to Robbins’s behavioral drivers:
- Certainty: Those seeking certainty might be cautious, viewing potential losses as too significant;
- Variety: Investors attracted to variety embrace volatility, seeing it as an exciting venture; and
- Significance: Individuals desiring significance consider unique assets as a way to stand out—whether it’s investing in gold during uncertain times or adopting bitcoin’s outsider stance.
Value or Illusion?
As Warren Buffett famously stated, “Price is what you pay; value is what you get.”
With gold and bitcoin, distinguishing between price and value proves exceptionally challenging. Lacking regular cash flows, neither asset offers a clear point of reference.
For some, this uncertainty renders them uninvestable, while for others, it becomes the very reason to engage.
Ultimately, whether gold or bitcoin is a prudent addition to a portfolio depends less on analytical models or metrics and more on an investor’s comfort with uncertainty, quest for excitement, and desire for significance.
These motivations emphasize that investing is not purely rational; it is equally influenced by psychology as it is by returns.
Beyond the Luster: What Truly Influences the Decision
Markets will always captivate with their alluring assets. Yet, the decision to pursue them is shaped not just by performance but also by our psychological drivers.
For those seeking certainty, traditional investments may hold the greatest allure.
For individuals in search of variety or significance, the allure of gold or bitcoin persists, regardless of their intrinsic value.
References
Efficient Capital Markets: A Review of Theory and Empirical Work; Eugene Fama; Journal of Finance, Vol 25, May 1970.
Discover the 6 Human Needs; tonyrobbins.com/blog. All that Glitters; Howard Marks; Oaktree Capital; December 2010.
The Calculus of Value; Howard Marks; Oaktree Capital; August 2025.
Chris Jordan is a client relationship manager at Sasfin Wealth.
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