Bitcoin vs Gold?

Written by Evgenia Sidorova
Written by
Investing reporter
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3   min.
Bitcoin vs Gold

What do leading gold authorities think?

For a long time, gold was considered one of the most trusted and risk-free assets, providing stable income. Now many people call bitcoin the new gold, but is this true? To find out, what asset wins in the bitcoin vs gold comparison, you need to consider expert opinions and current stats. Your goals are also important: some assets are good for short-term profit, but if you want to save and increase your capital in the long run, the strategy could be different.

Differences and similarities

Both bitcoin and gold can be used as a way to diversify an investment portfolio and compensate for the risks of fiat currency inflation. But the reputation of these two assets is different, and here are the most important facts:

  1. At the end of 2021, the cryptocurrency was substantially outpacing the yellow metal, if you consider bitcoin value vs gold. The former was up more than 13%, while the former – only 4%.
  2. Bitcoin, while being called digital gold, is characterized by high volatility and thus is more attractive for those who are interested in short-term profits.
  3. Gold, on the opposite side, can be called a “safe-haven asset”.

This made many investors consider switching to a more profitable asset, but the opinions of the experts on this matter vary.

How does bitcoin value vs gold change?

For example, George Milling-Stanley, chief gold strategist at SPDR ETF, says, that these two assets are not rivals. They can happily coexist on the market because they serve different purposes. His SDPR Gold Trust is currently the world’s biggest exchange-traded fund backed by physical gold. It is up 281% since its launch in 2004 but lost 4,5% in 2021.

Along with that, George Milling-Stanley highlights two reasons, why gold remains attractive to investors. First, it improves returns over the long term, and second, it helps to reduce volatility, especially in a period with high inflation (more than 5% in a year). According to his opinion, at the end of 2021 gold has not responded to current inflation numbers yet, but the situation is due to change in the nearest future.

How will it evolve in the long run?

Will Ring, Granite Shares Gold Trust founder and CEO, supports an opinion, that it is too early to talk about long-term trends. While some investors switch from gold to bitcoin, the true reason and extent of this trend cannot be defined yet. Bitcoin and other cryptocurrencies attract investors due to having a market cap, but it is hard to say if these are the same investors who would choose gold in other situations.

Will Ring also says that people buy bitcoin and cryptocurrencies for different reasons. Entering a cryptocurrency market “is a complete risk-on situation”. People, who buy bitcoin, are ready for its high volatility and other risks. Gold buyers are much more defensive: they want to counter inflation and preserve the purchasing power of the capital in the long run.

What does the bitcoin vs gold graph show?

The current bitcoin vs gold rate demonstrates a steady rise, which means, that bitcoin is outperforming gold despite some short-term fluctuations. But currently, the trend is not as steep, as it was, in previous years. As the website Longtermtrends shows, the curve is close to the flat trend, and only the future will show, if it will continue to rise, decline, or stay relatively flat.

What does the bitcoin vs gold graph show

With this trend along with the high volatility of bitcoin, many major investors prefer conservative strategies. Ray Dalio, ex-CEO of Bridgewater Associates hedge fund, openly says, that he is “not a big owner” of bitcoin. He states that he owns a relatively small amount of it, preferring gold as an asset that has a long history of being a reliable “store hold of wealth”.

So, while many investors interested in short-term profits are eager to purchase cryptocurrencies, major market participants are more cautious about bitcoin vs gold choice and do not refuse to rely on traditional assets while enriching their portfolios with more modern ones.

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