Why Owning Bitcoin is Much Smarter Than Owning Gold

Van Thanh Le

•

Oct 14 2024

2 months ago4 minutes read

Robot balancing on binary path with Bitcoin, gold fading

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The ongoing debate of Bitcoin vs. gold has been heating up for years, but let’s be real—Bitcoin is pulling ahead. While gold has held the title of “safe-haven” asset for centuries, Bitcoin’s rise over the last decade has proven it's more than just digital hype. Gold’s stability is old-school, while Bitcoin’s future potential is the game-changer everyone is betting on.

What makes Bitcoin so special? Keep reading to discover why this digital asset is outperforming gold in every way that matters.

Bitcoin vs Gold: Why Bitcoin is a Smarter Investment Choice

Before we delve into specifics, take a moment to review this table highlighting key differences between Bitcoin and gold:

Feature	Bitcoin	Gold
Scarcity	Absolute scarcity with a hard cap of 21 million coins	Annually increases by ~1-1.5% due to mining, recycling, central bank transactions. (Source)
Portability	Highly portable, can transfer value across the world in minutes	Portable but challenging to move large amounts, subject to security and logistics
Divisibility	Divisible into 100 million units (Satoshis)	Can be divided, but difficult and costly to refine into smaller units
Verification	Easily verifiable through blockchain	Requires physical verification, often expensive processes like re-smelting
Volatility	Highly volatile, presents high risk and reward potential	More stable, lower risk, traditionally preferred for wealth preservation
Inflation Hedge	Bitcoin’s fixed supply makes it a deflationary asset and a strong hedge against inflation	Historically, gold has been used to hedge against inflation, but its value stagnated recently
Regulation	Emerging regulatory environment; globally decentralized	Heavily regulated, especially for cross-border movement
Returns	Historically higher returns, over 140% in the past year, 92M% in 14 years	Lower returns in comparison: 38% in the past year, 125% in 14 years
Utility	Digital and financial applications (DeFi, remittances, etc.)	Used in electronics, jewelry, and dentistry
Liquidity	Bitcoin is liquid in most markets but can be affected by platform limits	Gold is liquid, but large transactions are slower and costly
Future Adaptability	Emerging as the “hardest asset” post-halving, with increasing adoption in financial systems	Traditional and well-established, but lacks technological adaptability

1. Historical Context: Bitcoin vs. Gold as Stores of Value

The Bitcoin vs. gold debate brings two assets to the forefront of value storage. Gold, with a market cap of $16.81T, has long been a safe-haven asset, while Bitcoin, at $1.28T, is a rising star in the same space.

Gold’s Legacy as a Safe Haven

Gold has held its value for centuries due to its scarcity and ability to weather economic instability. During crises like the Great Depression and the 2008 financial crash, gold’s value surged. Central banks continue to bolster their reserves, with 1,037 tonnes added in 2023, reflecting its importance.

According to the 2024 Central Bank Gold Reserves survey, 29% of central banks plan to increase their gold holdings, driven by inflation concerns and crisis risks.

Gold has a stable supply with diminishing mining reserves each year, making its scarcity inherent in its occurrence and extraction process.

Bitcoin’s Emergence as “Digital Gold”

Since its 2009 launch, Bitcoin has gained traction as a store of value, often referred to as "digital gold." Bitcoin’s appeal lies in its fixed supply of 21 million coins and independence from government control, offering protection from fiat devaluation. Institutions like MicroStrategy and Metaplanet have adopted it, and Bitcoin-backed ETFs are being launched by financial giants like BlackRock and Fidelity.

Institutions keep dipping their toes into Bitcoin with new acquisitions.

When considering who owns the most Bitcoin, major institutional players now hold a significant portion of the total supply. ETFs account for 5.25% (1.1 million BTC), while public companies like MicroStrategy hold over 252,000 BTC. Coinbase, acting as a custodian for institutions, holds nearly 4.93% of all Bitcoin. Additionally, governments such as the U.S. and China collectively hold over 392,000 BTC.

Institutional Shift: Gold ETFs vs. Bitcoin ETFs

Institutional investors are increasingly turning to Bitcoin over traditional gold investments. Goldman Sachs supports this view, with a research note by Zach Pandl predicting that Bitcoin will continue to erode gold’s market share as it gains broader adoption.

Currently, BTC ETFs hold $50.63B in AUM as per Coinglass data, while SPDR Gold Trust alone manages $73.52B—and it’s just one of several gold ETFs. As institutional adoption accelerates, Bitcoin ETFs have significant room to grow. While these products gain traction, the competition between gold ETFs vs. Bitcoin ETFs is intensifying, further positioning Bitcoin as the asset of the future.

2. Liquidity and Ease of Transactions: Bitcoin’s Superiority Over Gold

When comparing Bitcoin vs gold, Bitcoin clearly outshines gold in terms of flexibility and transaction ease. Bitcoin is tradable 24/7 on a global scale, allowing investors to buy, sell, or transfer funds instantly. Gold, on the other hand, is slow to move—transactions often involve costly processes like physical transport, verification, and storage.

Bitcoin transactions settle within minutes, regardless of borders, while gold transfers can take days, especially internationally. Bitcoin’s divisibility also gives it a huge advantage, allowing users to trade even tiny fractions, something that gold can't match without losing value. The added benefit? Bitcoin's transaction costs are much lower, avoiding the fees tied to moving and verifying physical gold.

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3. Volatility and Risk: Bitcoin’s Upside Potential with Gold’s Stability

When comparing Bitcoin vs gold, volatility plays a huge role in defining their appeal. In the last year alone, Bitcoin posted a 140% return, far outpacing gold’s 38% gain in the same period, despite gold breaking new highs.

If it’s still not attractive enough to you, look at this Woobull chart, which shows the performance of a $1 investment in Bitcoin and Gold since October 6, 2009. As of now, that $1 investment would be worth approximately $91,748,200 in Bitcoin, while the same amount in Gold would be just $2.

Even looking back to July 12, 2010, when gold traded at $1,181.7 and Bitcoin at $0.07, the numbers speak volumes: gold’s 124.8% increase to $2,657.2 pales in comparison to Bitcoin’s staggering rise of 92.5 million percent, reaching $64,750.

Bitcoin’s volatility may seem like a double-edged sword, but for investors seeking higher returns, the risk is worth the reward. While gold offers stability, Bitcoin’s potential for exponential gains makes it the go-to choice for those willing to embrace more risk.

4. Security and Transparency: Bitcoin Blockchain vs Gold Storage Risks

When it comes to security, Bitcoin’s blockchain technology offers a level of transparency and resilience that gold simply can’t match. Bitcoin operates on a decentralized, cryptographically secured network, making it resistant to tampering or manipulation. Although theoretical risks like 51% attacks exist, the scale of Bitcoin’s network makes this highly improbable. The biggest threats are more often cyber-related, like phishing or hacking.

In contrast, gold’s security comes with significant physical risks. Storing gold means dealing with high costs for vaults and security, not to mention risks of theft or transport mishaps. There’s also the potential threat of government confiscation during crises, which Bitcoin is immune to.

5. Future-Proof Investment: Bitcoin’s Adaptability vs Gold’s Static Nature

Bitcoin’s decentralized blockchain technology makes it a far more adaptable and future-proof investment than gold. While gold remains a static physical asset, Bitcoin continues to evolve. Innovations like the Lightning Network are already speeding up transactions, making Bitcoin better suited for a future where speed and efficiency are key. In contrast, gold, being a physical asset, cannot integrate with technology to improve its functionality.

What it takes to store gold vs what it takes to store Bitcoin.

Another key advantage of Bitcoin is its transparent and immutable ledger. All Bitcoin transactions are publicly recorded on the blockchain, reducing fraud and ensuring transparency. Gold, however, requires manual verification and physical handling, which can be time-consuming and prone to errors.

Beyond just a store of value, Bitcoin’s digital nature opens doors to programmability. It can be integrated into smart contracts, decentralized finance (DeFi), and tokenized ecosystems, allowing it to fit seamlessly into tomorrow’s financial landscape. Gold, limited to its static, physical form, can’t offer that same versatility.

FAQs

Why is Bitcoin better than gold?

Bitcoin is better than gold due to its superior flexibility, faster transactions, and adaptability in the digital economy. It’s also easier to store and transfer, with lower transaction costs.

Is Bitcoin replacing gold?

Bitcoin isn't fully replacing gold yet, but it’s increasingly seen as a modern alternative. Institutional investors are shifting from gold to Bitcoin as a hedge against inflation and economic instability.

What is one reason why Bitcoin is often compared to digital gold?

Bitcoin is compared to digital gold because of its scarcity. Like gold, Bitcoin has a limited supply, making it a store of value in uncertain economic times.

Will Bitcoin surpass gold?

Bitcoin has the potential to surpass gold as a store of value, especially with growing institutional adoption and its role in the future digital economy. However, gold currently remains a significant asset in traditional portfolios.

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Conclusion: Why Owning Bitcoin is Much Smarter Than Owning Gold

Bitcoin’s scarcity, liquidity, and technological innovation make it a smarter choice than gold. Its fixed supply, ease of transactions, and adaptability—especially with blockchain technology and innovations like the Lightning Network—outshine gold’s static nature. The growing shift from gold ETFs to Bitcoin ETFs shows that institutional investors are embracing Bitcoin’s potential as the future of wealth preservation. With Bitcoin’s digital flexibility and transparency, owning Bitcoin is the smarter move for those looking to hedge against economic uncertainty and secure their financial future.