Don't look now, but the Bitcoin (BTC 0.20%)-is-digital-gold argument is coming back. During the crypto market meltdown, nobody wanted to hear that Bitcoin was digital gold because the price of Bitcoin was tanking. But now that the worst of the crypto market sell-off appears to be behind us, and when the price of Bitcoin appears to have stabilized at about the $20,000 level, traders are once again talking about Bitcoin as a potential safe haven asset.

Adding fuel to the fire, Ethereum (ETH 0.53%) co-founder Vitalik Buterin recently suggested on a Twitter thread that "crypto is the better bet" compared to gold. If anything, Buterin's remarks take the argument one step further. It widens the net to include all crypto, not just Bitcoin. And it suggests that crypto is, quite possibly, a superior investment to gold during a period of market uncertainty. Does Buterin have a point?

Three arguments in favor of crypto

Buterin broke down his argument into three succinct points. Two of these, quite frankly, don't seem very compelling. For example, Buterin suggested that gold doesn't support the same types of "safe storage options" that are available in the digital world. I don't know about you, but gold seems pretty safe to me. 

Bitcoin represented as bait on a fishing hook.

Image source: Getty Images.

Buterin also suggested that gold is "inconvenient" and "difficult to use" when doing business. This seems to be a better argument because just about anyone can agree that tapping a button on your phone to send crypto anywhere in the world is much easier than lugging around a few gold bars to make a transaction. But it doesn't mean that crypto is a better investment than gold.

The third argument, though, is the one that really got me. Buterin suggested that "gold has less adoption" than crypto. If you take a huge, macro view of the situation, more people own crypto than own physical gold, and that gives it a measure of safety. Some 145 million American adults say they own cryptocurrency or have invested in crypto in the past. This is 56% of the U.S. adult population. 

Is crypto becoming more like gold?

The digital gold argument worked for as long as it did because Bitcoin seemed to be uncorrelated with any other asset class, meaning its price didn't move in the same as other investments. However, as we saw in 2022, Bitcoin is correlated, at least loosely, with the broader market. In other words, Bitcoin has the potential to go down when stocks go down. As a result, it lost some of its attraction for investors earlier this year.

But look at what's happening in the financial markets right now when it comes to volatility. Just about everyone agrees that Bitcoin is less volatile than it has been. Some traders are even calling Bitcoin "boring" now. If lower volatility for Bitcoin is a long-term trend, that would make it a much more attractive investment, right?

Secondly, Bitcoin is now much more correlated with gold than it has been for a long time. The correlation between Bitcoin and gold is at its highest point in 40 days. This is, admittedly, a very small sample set, but it does suggest that traders around the world are trying to figure things out, and relationships between asset classes may be shifting.

The battle to become the world's safe haven asset

At a time when many people are nervous about tech stocks and the market in general, is it really possible that crypto could become a safe haven asset? Will people who are worried about their money and savings really trust crypto over gold? 

Note that Buterin did not say that "crypto is a better investment than gold." What he said was that "crypto is the better bet." I don't think he's referring to a casino-style bet here. Instead, he's framing this in terms of game theory. Buterin came into crypto via the world of multiplayer online gaming, and in the past, he has made arguments to suggest that he views the financial markets as a similar sort of vast multiplayer game. This is a game in which cooperation is key, but communication and trust might be nonexistent. It requires a knowledge of game theory to succeed.

Based on this, I think Buterin is really suggesting something along the lines of the following: Given that it's impossible to communicate directly with market players around the world to find out what they are thinking, and given that the range of possible future outcomes is impossibly large, crypto seems to be emerging as the asset that has the highest probability of future success.

For now, gold is obviously a much safer investment than all but a handful of cryptos. But that's where things get interesting, because cryptos such as Bitcoin and Ethereum could be emerging as potential safe havens for nervous investors. Investing in crypto is always risky and volatile, but if relationships between asset classes continue to shift, it might be worth considering whether it's now time to hedge your bets with a little crypto.