Bitcoin vs gold: can digital gold beat its physical counterpart?

For centuries, gold has stood the test of time with little competition as an asset. To many, it’s the perfect asset. It's scarce and has become a sought-after metal. It’s long been a bastion of value and a hedge against economic turmoil. However, Bitcoin has challenged gold’s position in the last few years, leading some to call it “digital gold”.

How do the two assets compare? Read on as we compare gold and Bitcoin as tradeable assets. 

History of gold and Bitcoin

Gold has long been a symbol of wealth and a desired metal, going back to early civilizations thousands of years ago. It's been sought after for its scarcity and beauty. As humans evolved from the barter system, gold was one of the few universal assets. It was highly valued and desired in every part of the globe, and quickly became a currency of great value.

Unlike gold, Bitcoin has a very short history. It was created in 2009 by an individual or individuals under the pseudonymous name of Satoshi Nakamoto. Unhappy with the current system during the fallout of the 2008 financial crisis, Bitcoin was created to exist without any interference using the blockchain. In less than two decades, Bitcoin has come a long way. It's experienced numerous crashes. Nonetheless, the asset has shown resilience, and weathered storms due to its underlying technology. 

Characteristics of gold and Bitcoin

Gold has been accepted as a tangible store of value for centuries. It's a physical asset that can be exchanged without any oversight and stored in your home or any safe location you believe is fit. You can physically hold the gold you own. However, these features also make gold less desirable. It requires physical security, and takes time to transport. Gold is also a scarce asset that costs money to mine, giving it additional value. Yet, no one knows what the actual supply of gold is. 

Bitcoin, on the other hand, is fully digital. You can't physically hold your Bitcoin, and it’s intangible. That makes Bitcoin extremely easy to store and move around. The supply is also capped at a fixed 21 million Bitcoins, as is the number of new Bitcoins mined daily. Compared to gold, Bitcoin’s supply is both scarce and predictable. On the other hand, the digital nature of Bitcoin makes it susceptible to cyber-security threats. 

Additionally, Bitcoin is highly fungible, allowing you to obtain 1 BTC and divide it into any desired amount.  The same can't be said for gold. You’d need the help of a goldsmith to divide your gold, and there are limits to the extent you can physically divide gold. . 

Utility of gold vs Bitcoin

Gold is majorly used as a store of value. However, it has other uses, too. Gold is used in making jewelry and electronics due to its conductive and non-corrosive properties. These properties give additional value to gold and play into its scarcity. 

Bitcoin mostly has only one purpose: to serve as a means of exchange and a store of value. Even so, it does this better than any other asset, including gold. Bitcoin is a strong store of value as its supply and inflation rates are fixed, and its fundamentals can't be manipulated. As a means of exchange, Bitcoin wins again as you can instantly transfer your Bitcoins to anywhere worldwide in a few minutes, costing just a few dollars. That’s why Bitcoin is now widely accepted as a form of payment in countries prone to inflation. 

Performance of gold and Bitcoin

Gold has been a safe-haven asset with its price increasing with inflation or economic uncertainty. The price remains relatively flat when the economy is doing well. Gold peaked at about $1,919/Oz in 2011 as the economy recovered from the 2008 financial crisis. However, as the economy improved, gold’s appeal dropped. The metal enjoyed a resurgence after the COVID crash in 2020 and peaked at $2,150 in 2024. As a result, the value of gold increased by nearly 15% in the 13 years between 2011 and 2024. 

Bitcoin, meanwhile, has seen massive growth during its relatively short lifespan — figures that are hard to comprehend with any other asset class. In 2011, Bitcoin was still trading in the single digits, and was still not seen as a serious asset class. 

In 2011, Bitcoin was just getting started and wasn't even at its price discovery phase. At the same time, gold was a well-established market that had been around for centuries. Nonetheless, in a very short time, Bitcoin has already reached a position to challenge gold. 

Trading gold vs Bitcoin

Bitcoin offers a remarkably accessible entry point, as it requires nothing more than an internet connection and access to a trading platform. It boasts a low barrier to entry, making it an appealing option for new traders. All that's needed is a stable internet connection and a reputable exchange to trade 24 hours a day, seven days a week.

On the other hand, you can own gold simply by purchasing the physical metal at a store. This is much simpler than getting started with Bitcoin. Even so, most people don't buy and store physical gold to trade. To trade gold, you’d have to register with an exchange that has it listed in your country. So, the barrier to entry with gold is a little higher when trading on an exchange. 

Regulations

The gold trading industry is tightly regulated, with well-established protocols governing its exchange, storage, and taxes across all nations. Although this is reassuring for many traders, it can restrict growth.

Similarly, Bitcoin has also gained acceptance, with regulators giving clear directions in the last few years. While most countries have embraced Bitcoin, some still try to restrict or outright ban it. The regulatory uncertainty in some countries could be a barrier to Bitcoin’s adoption. However, one recent catalyst for adoption was the approval in 2024 of a Spot Bitcoin ETF. The ETF’s arrival opened up Bitcoin to many new traders and solidified Bitcoin’s position as a reliable asset class. 

Bitcoin vs gold

Although gold has long been considered the best store of value by many, Bitcoin has emerged as a contender. Read on for a quick guide to how the two assets compare.

Future of gold and Bitcoin

Gold has little to prove. It's stood the test of time as a reliable store of value and a hedge against inflation. Gold’s growth prospect is limited, but it's steady. With its usage in electronics increasing, gold’s utility could continue to rise. 

Bitcoin, meanwhile, shares some similarities and differences. While Bitcoin has seen a meteoric rise in one short decade, there’s so much room to grow. With its limited supply and fast transfer speeds, Bitcoin’s value proposition is expected to only rise in the coming years as it gains wider acceptance. 

The final word

Although Bitcoin is often called “digital gold,” the differences are vast. Both serve as stores of value, yet Bitcoin has technical advantages in terms of fungibility, ease of transfer, and storage. Meanwhile, gold has a timeless appeal, and has demonstrated its value and resilience over generations. 

Ultimately, choosing the right asset for your portfolio depends on your personal preferences, risk tolerance, and trading goals. Remember: informed decision-making is the key to trading any asset. 

We encourage you to research and understand the opportunities and potential pitfalls each asset presents before committing your funds. By doing so, you’re better placed to make choices that align with your goals.