Bitcoin vs. Gold

Bitcoin vs. Gold

Bitcoin and gold have been fiercely debated as the world’s best store of value. Let’s compare them across several key metrics.

Price Performance

Gold’s price history dates back over 6,000 years, with the oldest known gold artifact being a bead from 4500 BC in Bulgaria. Its price saw around an 1800x return from 1247 to its recent all-time high over $2,000 per ounce.1 Bitcoin’s initial price in 2009 was technically zero. Its earliest recorded trading price was $0.09 in July 2010, marking a staggering 760,000x return to its all-time high near $69,000 in 2021 – likely the best performing asset ever.1 However, Bitcoin is extremely volatile compared to gold.

Supply and Demand Economics

Bitcoin’s supply is programmatically fixed at 21 million coins, with new coins issued every 10 minutes at a diminishing rate through a process called “halving” every 4 years. Bitcoin’s current annual inflation rate is around 1.7%. Gold’s total supply is estimated around 210,000 tons above ground, with 60,000 more yet to be mined. Annual new gold supply is 1-2% through mining. On the demand side, there are over 45 million non-zero Bitcoin wallets, up 45x in the last decade. For gold, global demand averages 3,000 tons per year, spiking to over 4,100 tons in 2021 driven by central bank buying.

Utility

Beyond a store of value, gold’s primary use is jewelry (50-80% of demand), with manufacturing like electronics accounting for around 10%. Bitcoin’s primary utility is enabling digital payments and self-sovereign wealth storage outside the financial system.

Regulation

Historically, gold ownership has rarely been outright banned, except briefly in the U.S. in 1933. Bitcoin faces more regulatory uncertainty due to its ability to circumvent government controls and past use for illicit activities.

Security

Bitcoin is secured by a decentralized network of over 47,000 nodes globally. Even a catastrophic event impacting most of the world would leave Bitcoin functioning if one node remains. Gold’s physical supply chains are vulnerable to disruption. Verifying gold’s authenticity is difficult, leading to counterfeits circulating.

Popularity Drivers

Both Bitcoin and gold tend to rise when money supply increases. Gold is also sought in times of economic/political uncertainty. Bitcoin could decouple from risk assets like stocks if adopted as a neutral global currency for trade by governments accumulating it to ensure transaction processing. A catastrophic cyber attack could drive people back to gold as an analog store of value immune to such shocks. In summary, Bitcoin offers unprecedented price appreciation potential but high volatility, while gold is a time-tested store of value. Holding both digital and physical assets may be a prudent strategy depending on one’s time horizon and views on systemic risks.