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Comparing Gold and Bitcoin as Store of Value: An In-Depth Analysis

Updated Dec 28 2023
7 Min
mr slava
Nick Patel
CEO & Founder at Clinq.Gold, Bank of Bullion | Keynote Speaker

As of 2023, Bitcoin has already celebrated its 13th birthday and continues its glorious though contradictory path in the world’s crypto markets. Much has happened to BTC over a decade, from the audacious rises to $60,000+ in value to the notorious overnight falls causing the demise of yesterday’s happy and rich BTC owners. 

Though BTC has broken many hopes since its creation, it still has a large (and growing) following across the globe, with many enthusiasts calling it the next-generation gold. Thousands of investors have added BTC to their long-term investment portfolios, claiming that it generally meets the criteria of a worthy store of value despite its volatility, short history, and the recent crypto winter. So, how do gold and BTC compare as store-of-value options? Here is a detailed breakdown. 

What’s an Investor’s Store of Value? 

In a nutshell, a store of value is an asset (of any kind) that can preserve and increase its purchasing power over time. Besides, a vital feature of the store of value is its holder’s ability to exchange it for fiat money, precious metals, real estate, and other kinds of property without challenges or delays. 

For an asset to be regarded as a feasible store of value, it should meet the following criteria: 

  • Fungibility 
  • Durability 
  • Portability 
  • Scarcity 
  • Verifiability 

Let’s see whether gold and Bitcoin meet these requirements and how they compare in terms of investor confidence, long-term prospects, and stability. 

Centuries-Long Value of Gold 

Gold has been in use since times immemorial, helping people transact and representing an asset with inherent value and status. Golden accessories and jewelry have always been used as symbols of wealth and privilege, so gold has both an objective, tangible value and a subjective, psychological weight as a store of value proven with centuries, if not millennia, of human usage. 

The greatest strength of gold as a store of value is that it has an inherent value not connected to the performance of some industry, economic sector, or separate company, unlike stocks or national currencies. Gold has proven to be relatively resilient to market forces, and its price tends to remain the same or increase in periods of economic downturns and crises. Therefore, it can be an effective offsetting instrument for inflation, recession, and even wartime. 

This way, gold is an excellent example of scarcity, durability proven by centuries, and verifiability. However, it poses challenges to investors in terms of fungibility and portability. In the classical sense of gold investment, gold is bought in the form of bullion; this way, an investor needs to organize costly, secure storage for their bullion gold, seek insurance for their physical assets, and freeze their money in the gold bars that cannot be divided into small bits. 

This challenge is currently addressed via investment in gold ETFs or tokenized gold, but in the first case, it is not gold ownership per se but rather the purchase of the issuer’s obligations that you get. Gold-backed tokens are definitely a more flexible option for gold investment and ownership of fungible gold assets. Yet, the investor should note that these tokens are cryptocurrencies by nature. That’s why there is a tiny difference between gold-backed tokens and BTC – a much smaller one than between BTC and classical bullion gold.  

Innovative Store of Value in the Hi-Tech Era: BTC 

Nobody can doubt the fact that the digital world is heading to a Web3 revolution, which will inevitably affect digital finance, investment, and related industries. That’s why forward-looking investors are already considering investments in crypto to head the bandwagon of crypto adoptees and reap immense benefits from early purchases. One of the safest options in this regard is Bitcoin, the first cryptocurrency that took the world by storm in 2009. 

So, why should you view BTC as a next-generation store of value? Here are a couple of reasons in favor of considering this investment seriously: 

  • BTC possesses excellent liquidity, which means you can sell and buy it in a matter of seconds without significant price slippage. There’s always demand and supply for BTC at any exchange. 
  • BTC offers much flexibility and agility due to its decentralized nature. No paperwork, no red tape, and no taxes (in some jurisdictions).
  • BTC is perfectly fungible, meaning that you can own a tiny BTC fraction worth $10 and still transact with it. 
  • BTC’s verifiability is also high, with the blockchain technology securing the absence of fraud or scam risks. 

Besides all these benefits, BTC is perfectly portable – it’s a digital asset you can store on a cold wallet or on your smartphone regardless of the sum of your BTC possessions. By the way, it’s also scarce – there’s already a known cap on the number of BTC coins, meaning the asset is finite and will only grow in price.  

A Word on Volatility 

Many conservative investors point to the need to consider volatility as a guiding principle for choosing a store of value. Indeed, gold wins the battle in this aspect. Just fancy:

  • The price of gold fluctuated from $250 to $500 per ounce within 25 years (from 1981 to 2005). 
  • The price of BTC grew by 100% within 10.5 months (January 1, 2021 to November 12, 2021), only to fall by 74% within the next year (November 2021 – November 2022). 

Once you have a look at BTC from this angle, volatility may seem pretty scary. Yet, BTC is the slowest cryptocurrency and makes such moves rather rarely, giving investors hopes for its slow but steady appreciation as the world heads to greater Web3 adoption. 

So, Which Choice Is Wiser? 

As you can see, both gold and BTC can act as stable and conservative investment instruments. They can both function as stores of value for investors with specific mindsets and investment strategies. While fans of traditional investment tools may still rely on gold in the long-term perspective, BTC remains the most reliable and the least volatile option for fans of the Web3 universe of cryptocurrencies. 

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