Settling the Debate: Is Bitcoin Really a Better Investment Than Gold?

Investors are seeking ways to grow their portfolios successfully, and they now have the possibility to easily do so, as there are plenty of investments available. Over the last few years, the emergence of cryptocurrencies as an investment option has enticed investors to add them to their portfolios, with Bitcoin being a top choice. The digital asset has had an excellent performance over the year, with the value of the bitcoin price exceeding $67,566.83 in 2021.

Although traditional investors have long considered stocks as their primary source of investment, it has become increasingly evident that diversity is essential in a fast-changing world. But in this quest towards the most successful investment, one question runs through every investor’s mind: is Bitcoin better than gold? Well, this depends on many factors, and as much as we’d want to give a simple answer, that’s not possible. Throughout history, gold has been a haven for people to turn to, especially during difficult economic times. Its enduring popularity has much to do with its divisibility, scarcity and durability. However, in those scenarios related to digital transactions, Bitcoin outperforms gold without a doubt, offering unmatchable censorship resistance that gold simply doesn’t provide, making it suitable especially for digital trade and cross-border transactions.

Below, we will take a detailed look at Bitcoin and gold to give you the clarity you need in your investment journey and help you figure out which is a better option.

Bitcoin Vs. Gold as a Store of Value: How Do They Compare, and Which Is the Winner?

Simply put, a store of value represents an asset that can preserve wealth over the long run and act like a hedge in times of inflation and economic decline. Gold has long been considered to tick all the boxes for what a store of value means, and if we compare the price of both gold and Bitcoin, there is no doubt that it does an excellent job when it comes to preserving wealth. However, it doesn’t have the same potential as Bitcoin in growing wealth. Since 2009, gold has had a total return of 57%, while Bitcoin’s return was 33,983,965%. Similarly, the inflation-adjusted return was 3.3% for gold and 145% for Bitcoin. Now, this comparison isn’t really fair, given that gold has existed for so long while Bitcoin is only 14 years old. So, it's essential to dive even deeper into this aspect to draw a more accurate conclusion.

Since 1980, gold has produced an annualized return of 3,1%, making its performance lackluster. After 40 years of inflation, gold’s total annualized return was -10.1%. From this perspective, it’s evident that Bitcoin isn’t only better than gold when it comes to preserving wealth, but it is also a more helpful instrument against inflation, at the same time helping you grow your wealth in the long run.

How did Bitcoin succeed in rising to this level? It’s mainly because it boosts some of the main characteristics that have made gold appealing to investors in the first place. Both gold and Bitcoin are finite, but the latter takes this aspect further. Gold is a physical resource that requires mining, and it doesn’t have a fixed supply but rather, it fluctuates depending on the mining activity. On the other hand, Bitcoin has a fixed supply of 21 million coins, which will enter circulation slowly until 2140 – the year when the last Bitcoin will be mined.

Unlike gold, Bitcoin is portable and easy to transfer – you can send it anywhere in the world without relying on a payment processor or a bank, and the process takes only a few minutes. All you need to complete the transaction is a reliable Internet connection.

Another advantage of Bitcoin lies in its significant degree of divisibility – namely, each coin can be divided into 100 million satoshis, turning Bitcoin into an efficient medium of exchange for transactions. And let’s not forget about the technological advancements of Bitcoin, which is built on the blockchain, an immutable and transparent digital ledger. The blockchain verifies and records all the transactions, so altering or manipulating the data is actually impossible for malicious actors. This level of security that Bitcoin’s blockchain provides is unparalleled in the financial world, representing a game-changer for the sector.

Choosing Between Gold and Bitcoin Depends on Your Investment Goals and Risk Tolerance

Given the discussion until now, it may seem like Bitcoin is a better investment than gold. And to a certain degree, it is – at least if you’re looking to generate large returns. However, it’s essential not to forget that Bitcoin is volatile compared to gold. If you prioritize stability and want to avoid engaging in risky speculation or constantly monitoring the news, gold is likely a better option. Bitcoin is for those who are not afraid to take certain risks to gain potentially significant returns. Suppose you are a thrill-seeker, and you are okay with losing some of your money. In this case, it’s a good idea to consider Bitcoin, given its massive potential – but make sure you are prepared for such a bumpy ride.

Since they serve different functions, both Bitcoin and gold are a valuable addition to your investment portfolio. If you are unsure where to put your money, take the time to do your research and weigh the pros and cons of both gold and Bitcoin. For instance, if you value agility in your investments, of course, you’ll not look into gold, which necessitates physical possession. Instead, you will choose Bitcoin, as you can trade it easily, accessing your funds in a very convenient manner. Moreover, Bitcoin wins over gold when it comes to government regulation. Gold has always been controlled by the government, impacting its trade and value alike. But that’s not the case with Bitcoin, which relies on a decentralized blockchain, eliminating government interference from the equation.When it comes to the utility of the two, it is well-known that gold has been utilized in different applications, whether luxury items, currency, electronics, and so on. Similarly, Bitcoin has great utility as a form of borrowing, lending, and much more.

As you can see, gold and Bitcoin have some striking differences, so it’s worth considering what you’re looking to get out of your investment journey and make an informed decision that aligns with your financial goals.