Gold vs. Bitcoin: Which is Better to Invest in?

Note: volatility in Gold and Bitcoin has a different market structure.

The speculative component in the sharp movement of Gold is low, it is usually the result of the actions of institutional participants with real trading volumes. That is why sharp gold price rushes are amenable to reasonable technical and fundamental analysis, and the trader has an opportunity to reduce or at least control potential losses.

Speculation on BTC, as well as on any crypto-asset, is most often created for the pamp effect, without injecting real volumes into the market, to force small traders to make unjustified deals. This spike then quickly rolls back and collects our StopLoss. It is extremely difficult to calculate and prepare for such spikes in time.

What are the similarities and differences between gold and Bitcoin?

Investors often draw parallels between gold and Bitcoin as alternative assets, but a deeper exploration reveals a complex tapestry of similarities and differences.

• Regulations: Bitcoin's regulatory landscape is a patchwork quilt of national policies. In some jurisdictions, it enjoys the status of legal tender, while in others it is tightly regulated or banned. Gold, universally accepted for centuries, is regulated too but within a much more stable and established framework.

• Utility: The utility of Bitcoin is a narrative in progress, with its roles expanding from a speculative asset to a means of payment, and as a foundation for decentralized finance (DeFi) applications. Gold, by contrast, boasts a time-tested portfolio of utilities. It's not just the bedrock of the jewelry industry but also has significant applications in electronics, medicine, and of course finance.

• Liquidity: Liquidity is a dual-edged sword for both assets. Bitcoin's liquidity is tightly coupled with market sentiment and regulatory news, leading to rapid changes. Gold, traditionally liquid, can sometimes face logistical challenges in physical form, affecting its immediate ability to convert.

• Volatility: Volatility stands out starkly in the comparative landscape. Bitcoin's price trajectory in 2024 exemplified its high-risk, high-reward nature, with massive peaks and troughs within a single year. Gold's price movements in the same period were modest in comparison, reinforcing its reputation as a stabilizing asset during periods of financial turbulence.

Investors may perceive Bitcoin as a dynamic but risky asset, suitable for those with a high-risk appetite, while gold remains the traditional safe-haven, attracting investors seeking stability and long-term value preservation.

Best brokers to trade gold

1

9.4/10

Go to broker

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest.

Minimum deposit:

$50

Bonus for deposit:

0%

Regulation:

CySEC, FCA, ASIC

Review

The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC (109/10) and eToro (UK) is licensed by the British regulator FCA (583263). The broker also has a representative office in Australia and the USA. eToro Profile Details

Pros/Cons

•the minimum transaction amount for copying is $1;

•handy functionality for passive investing;

•regulated by independent monitors;

•it is possible to purchase contracts for fractional shares (that is, to invest amounts less than the cost of one share);

•it is possible to buy shares at once (not CFDs) on the US stock exchanges.

•high spreads;

•periodic technical failures in order execution;

•lack of the most popular platforms such as MetaTrader 4 and MetaTrader 5 in Europe and the CIS;

•no access to ECN systems, orders are processed only according to the STP (straight-through processing) scheme with access to specific liquidity providers;

•there is a commission for withdrawing funds;

•impolite support staff;

•inconvenient website.

Study Review

2

9.2/10

Go to broker

Your capital is at risk.

Minimum deposit:

No minimum

Bonus for deposit:

0%

Regulation:

FSC (BVI), ASIC, IIROC, FCA, CFTC, NFA

Review

The name OANDA is an acronym for “Olsen & Associates” or “Olsen AND Associates”. It is registered in the United States and provides its clients with a wide range of financial services in most countries of the world. The company was founded in 1996 and is currently regulated in four jurisdictions. The main regulator of the broker is the UK Financial Conduct Authority (FCA). Oanda Canada is licensed by IIROC. The company has several significant awards to its credit, including a victory in the category "Best Forex Trading Technologies" from the UK Forex Awards, "Best Trading Platform" from FX Week, as well as "Best Customer Service" from the US Foreign Exchange Report.

Pros/Cons

•Minimum deposit from 1 dollar.

•A large selection of the most popular trading instruments.

•Several reliable and reputable financial regulators.

•Inconvenient and poorly functioning site.

•Lack of cent accounts.

•Lack of bonus programs.

Study Review

Gold vs BTC: Which is a better investment for you?

The chart below shows that as the years go by, more and more gold is being given for one bitcoin. This is a valid argument, but it cannot definitively conclude that bitcoin is better than gold.

Bitcoin vs Gold: A long-term chart

The debate between investing in gold versus Bitcoin is a decision that should align with individual investment goals and use cases.

Use cases and goals

Gold has stood the test of time as a universal symbol of wealth. Its use cases extend from a hedge against inflation and currency devaluation to a tangible asset that can be inherited through generations. For investors seeking stability and a conservative investment approach, gold's long-standing history offers comfort.

Bitcoin, being a relatively new asset class, appeals to those with a more progressive investment outlook. It is seen as a hedge against the same macroeconomic factors but is also embraced by those looking to diversify into digital assets that have the potential for significant growth.

Long-term returns

Gold has provided steady, though not spectacular, returns over the decades. Its price appreciation reflects its perceived value as a finite resource and a fallback during geopolitical uncertainties. In contrast, Bitcoin's historical returns have been meteoric at times but come with substantial volatility and risk. The potential for high returns is balanced by the possibility of dramatic declines.

Ways to own it

Gold can be owned physically in the form of bullion or coins, and virtually via gold certificates, ETFs, or stocks in gold mining companies. Each method has different implications in terms of liquidity, security, and ease of trade.

Bitcoin ownership is entirely digital, maintained through wallets and traded on exchanges. It can also be invested in through Bitcoin trusts, ETFs, or by owning stocks in companies with large Bitcoin holdings. Digital ownership comes with concerns about security, such as hacking risks, but offers high mobility and ease of transfer.

Is it a good idea to invest in Bitcoin?

To understand whether Bitcoin aligns with your investment strategy, consider the following pros and cons.

Advantages Explained:

• Potential for High Returns: Bitcoin has been known for its rapid price appreciation over short periods. Early adopters have seen exponential growth in their investments, making it an attractive asset for those seeking high returns and willing to withstand volatility.

• Decentralization: One of Bitcoin's core advantages is its decentralized nature. It operates independently of central banking systems, making it less susceptible to government manipulation or inflationary policies.

• Liquidity Despite its volatility, Bitcoin is one of the most liquid investment assets. It can be easily traded 24/7 on various exchanges, and the growing acceptance of Bitcoin as a payment method has only enhanced its liquidity.

• Transparency and Security: The blockchain technology that underpins Bitcoin is transparent and secure. All transactions are publicly recorded and immutable, which reduces the risk of fraud and provides a clear transaction history.

• Limited Supply: Bitcoin's supply is capped at 21 million coins, making it a deflationary asset by design. This scarcity can potentially lead to price appreciation as demand increases, particularly as global economic policies trend towards inflation.

Disadvantages Explained:

• Volatility: Bitcoin's price is highly volatile. While it can lead to high returns, it can also result in significant losses. The cryptocurrency market is known for its rapid price swings, which can be triggered by various factors, from regulatory news to market sentiment.

• Regulatory Uncertainty: The regulatory environment for Bitcoin is still evolving. Sudden regulatory changes or crackdowns can cause price fluctuations and affect the ease of use of Bitcoin as an asset.

• Technical Knowledge Requirement: To invest in and securely manage Bitcoin, a certain level of technical knowledge is required. Understanding technology wallets, exchanges, and the principles of blockchain can be barriers to entry for some investors.

• Lack of Recourse: Bitcoin transactions are irreversible. If bitcoins are sent to the wrong address or a user falls victim to a scam, there is no recourse to recover the funds, which is a significant risk for investors.

• Environmental Concerns: Bitcoin mining is energy-intensive, leading to concerns about its environmental impact. Investors who are environmentally conscious may find this aspect of Bitcoin investment problematic.

Investing in Bitcoin requires a nuanced understanding of both its technological underpinnings and the market dynamics at play. It's a speculative investment that offers the potential for high returns, but with the accompanying risks that should not be overlooked.

For more information, read our guide on How Much Money Do I Need To Start Investing In Bitcoin?

Is it a good idea to invest in gold?

Consider the following pros and cons to gauge if gold fits your investment criteria.

Advantages Explained:

• Wealth Preservation: Gold is a stalwart against inflation, often holding its value better than fiat currency over the long term.

• Safe Haven Asset: It's a go-to asset in turbulent times, potentially appreciating or holding steady when other assets falter.

• Diversification: Adding gold can diversify a portfolio, usually moving inversely to stocks and bonds.

• Tangible Asset: The physicality of gold can be appealing, offering a sense of security as a tangible commodity.

• Global Market: Its liquidity is bolstered by universal acceptance and a vast, global market.

Disadvantages Explained:

• Storage Costs: Physical gold requires secure storage and insurance, leading to extra expenses.

• Lower Short-Term Returns: Compared to stocks, gold doesn't typically offer the same growth potential over short periods.

• No Income: Gold doesn't produce income like dividends or interest, profit is only through price appreciation.

• Market Sensitivity: Gold prices can still fluctuate due to factors like interest rates and mining output.

• Opportunity Cost: Allocating funds to gold might mean missing out on higher returns from other assets during market upswings.

Gold is a conservative investment choice suited for risk mitigation and wealth preservation. It can serve as a portfolio stabilizer but doesn't promise the income or high returns that other asset classes might.

Interested in investing in gold? Check this: Best Ways to Invest in Gold for Beginners in 2024

How much crypto and gold should be in your portfolio

Determining the right mix of crypto and gold in your investment portfolio hinges on your risk tolerance, investment horizon, and financial goals. As a general rule, a diversified portfolio is designed to mitigate risk while capturing growth.

Financial advisors often suggest allocating a modest portion to high-risk assets like cryptocurrencies, typically between 1% and 5% of your total portfolio. Gold, considered a safer investment, might comprise a slightly larger share, often recommended between 5% and 10%, serving as a counterbalance to the volatility of the stock market and other high-risk investments.

Ultimately, the allocation should align with your comfort level with uncertainty and the amount of capital you can afford to expose to more volatile investments. It's also essential to regularly review and adjust these allocations in response to changing market conditions and personal financial circumstances.

According to Oleg Tkachenko, one of TradersUnion experts:
It makes sense to increase the share of Bitcoins in the portfolio if the investment horizon is very long. The shorter the investment horizon, the less risky assets should be in the portfolio.

For further insights into gold and Bitcoin, read our predictions on:

• Gold (XAU) price prediction 2024, 2025, 2030

• Bitcoin Forecast 2024, 2025, 2030