Gold vs Bitcoin – Which Is A Better Investment

Many investors are looking to acquire more assets to hedge their investments and grow their portfolios. Fortunately, an increasing range of  investment types are becoming available and accessible to retail investors.  In the past decade or so, the emergence of cryptocurrencies as an investment route has enticed investors to diversify their portfolios,  with Bitcoin being the market mover.

Traditionally investors have looked to the stock market as their primary means of investing, but many other choices could be worthwhile. In a fast-changing world with increasingly fragile currencies and global economy, it’s becoming apparent that diversity is key. Whilst digital currencies are popular due to the possibility of life changing gains,  investors shouldn’t dismiss investment options with a long history and track record. A great example of this is investing in gold bullion or other precious metals, which can be overlooked for the modern wave of liquid investments. But how does Gold stack up against the darling of cryptocurrency, Bitcoin?

Key Takeaways

• Gold’s proven longevity and appeal as an inflation hedge provides a  safer investment choice than crypto.
• Bitcoin is a more volatile investment  with far greater upside potential than Gold but with that comes huge downside risks
• As a relatively new market, Bitcoin is still light on regulation and the future of the market is still unclear, unlike Gold.
• There is always the possibility that a crypto currency’s value could fall to zero due to laws, regulation or corrupt management, whereas physical gold holds an intrinsic value.

Gold has often been the currency of choice throughout history because it is a valuable and scarce commodity. Gold acts as a hedge against high inflation and deflation, helping to manage the impact of changing interest rates. As gold is rarer than most other metals, it holds and increases its value well.

Precious metals such as gold and silver help solidify investors’ finances through ownership of tangible physical coins or bars rather than relying on paper assets. The World Gold Council aims to promote and maximise the industry’s potential growth of gold consumption. They set the expected standards and aim to strengthen the markets, which is great for investors.

Unlike a gold-backed (fiat) currency, Bitcoin is backed by blockchain technology and free of a central authority. It began with niche enthusiasts who wanted an encrypted and decentralised system for digital currency. The idea was Bitcoin would be an alternative to the stock market and the banking system.We will look at gold vs bitcoin in greater detail to help you get the right strategy for investing. The first key point is that investing in gold is something that is regulated and understood by central authorities, while Bitcoin is not. Let’s see how else they compare.

Now we focus on directly comparing the two assets on a number of key features which impact investors. In this section, we put Gold and Bitcoin head-to-head on Security & Safety, Volatility, Price Performance, Ease and Speed to Sell, Track Record & History, Scarcity and finally Tax Efficiency. At the end of each section, we declare which of the two investments performs better for that factor.

Gold has shown itself be be more secure over a longer period of time, and so wins this category.

Gold is far less volatile than Bitcoin on a daily, weekly and annual basis.

If you time the market right, Bitcoin’s returns will smash those of gold. However, get it wrong and you could lose your life savings. Bitcoin can be more akin to gambling, with some winners and many losers. Bitcoin wins for returns – if you get lucky!

Both markets have good liquidity, but Gold is one of the most liquid investments in the world and is our idea of the winner.

Gold has stood the test of time, and for longevity is the winner.

Bitcoin is probably more scarce than Gold, and if issues with fake Bitcoin are fixed, the value could rise.

As certain types of gold are free from capital gains tax, Gold comes out a ready winner for this category.

As always this depends on the kind of investor you want to be and what kind of risk you want to open up your investment strategy to. Bitcoin presents an opportunity for those with a higher risk tolerance whereas physical gold presents a long-term, secure investment opportunity. You can see for yourself by checking our live gold prices.
We would recommend a portfolio which utilised either gold bars or the various types of gold coins, especially as a long term strategy for gold investment.

Even though gold bullion remains a solid investment, digital currencies, like Bitcoin, have become increasingly popular among investors. Investors have made a lot of money on Bitcoin, especially a few years ago, but then came the wild swings and a huge decrease in the market which is yet to recover. There are however a few benefits to owning Bitcoin.

One of the main appeals with Bitcoin is its decentralised nature. There’s a growing trend towards taking control of your personal finances and having more independence from the authorities.

Banks are now regularly making it difficult for customers to spend their own money. It’s common for transactions to be blocked if a bank doesn’t approve and there’s an increasing feeling that authorities are dictating what we can and can’t do.

With the 2008 bank bail-outs still fresh in the mind, the post-Covid economy suggests high street and central banks are once again vulnerable. But with global debt now at record highs, bailouts may not be offered, leaving savings susceptible to being taken. Bitcoin allows payments outside of the banking system, making overseas payments easy and instant.

Similarly, Governments can increase interest rates and taxation to impact and regulate their own currency and economy, but currently have no control or power over Bitcoin.

For this reason, Bitcoin represents a huge danger to the control and prosperity of the establishment, which is why crypto’s adoption is meeting huge resistance from these institutions.

It’s common knowledge that the threat Bitcoin poses to central banks has motivated them to start developing their own Central Bank Digital Currencies (CDBC) to compete with Bitcoin. The UK, US, China and Euro-region are all several years into development of these CBDCs and plan on launching them in the coming years. If they’re widely adopted, it could spell the end of Bitcoin. But the fact that such ‘centralised’ digital currencies could be used to control how the public spend their money, they are only acting to strengthen the resolve of decentralised crypto supporters.

Clearly gold is a long-established and accepted market, so experiences less resistance from the authorities. It enables the public to take a degree of control of their finances outside of the general banking system.

Gold can now be purchased digitally. This isn’t necessarily a type of digital currency, but it allows you to invest in the yellow metal anywhere, anytime. Gold ETFs, also known as Gold Exchange Traded Funds, will enable you to invest in gold through the stock market.

To be eligible, investors must purchase a minimum of one unit equivalent to one gram of gold to trade in gold ETFs. Plenty of guides can further cover the benefits of gold investment, so you understand if you should still opt for actual gold.

Investors can also add to their portfolios by purchasing Gold Mutual Funds. These Mutual Funds track the price of gold as the assets rise and fall in value. It’s good to know that mutual funds charge investors an expense ratio, a fund management charge, and the actual charge for purchasing the underlying asset.

Similar to gold, Bitcoin can be purchased online through traders, both through private platforms as well as public marketplaces. The Bitcoin vs gold debate is challenging, but it’s important to note that it is primarily dictated by market downturns either way.

On face value, Gold and Bitcoin are polar opposites. Physical gold bars and coins have an intrinsic value with a millennial track record. It appeals to those seeking to reduce their risk profile. In contrast Bitcoin’s value is truly subjective, with a distinct danger of being worthless if authorities succeed in banishing it from the globe.Most of its investors seek the possibility of getting rich, with the knowledge that ownership represents a huge financial risk

But as Bitcoin’s existence has progressed, it’s become apparent that these two ‘alternative investments’ not only share some commonalities but can also appeal to the same investor base.

Both assets provide the opportunity for investors to proactively take control of their finances outside of the traditional banking world. Both investments appeal to those who refuse to accept the control and established investment format.

For those reasons, many of our precious metals investors also own some crypto currencies, including Bitcoin. A very common strategy is to diversify between Gold, Silver, Bitcoin and altcoins. If cryptos rise significantly in value, these investors ‘remove some chips from the table’ by selling some crypto and using funds to solidify that profit into solid gold.

History sides with gold, but you should still look to diversify your investments. Look into other precious metals, such as silver and also the different kinds of gold to make sure your portfolio is diverse.

We are an accredited team for dealing and providing guidance in Gold and Silver investing, and are accredited by:

• British Numismatic Trade Association (BNTA)
• National Association of Pension Funds (NAPF)
• Chartered Institute for Securities & Investment (CISI)
• British Numismatic Society
• Royal Numismatic Society

We also offer buyback guarantees for peace of mind and have over 1000 5-star reviews and counting from our happy, trusted clients. You can see more about why you should trust us on our why buy from us page or get in touch with us at our Hatton garden offices by calling 020 7060 9992.

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Image credit: Michael Wuensch