Gold vs. Bitcoin

With gold and Bitcoin setting records in 2024, the gold vs. Bitcoin debate is only getting louder. Investors trying to find their footing in the evolving financial world and uncertain global economy are adding to the din. 

You might be among those asking whether gold vs. Bitcoin is the right investment choice in 2025. This comparison of gold and Bitcoin can help you decide if either alternative investment is right for your portfolio.

Investing in Gold

The history of gold stretches back more than 6,000 years, cementing it as one of the oldest symbols of wealth and stability. In troubled economic times, investors have long considered gold a store of value and a hedge against inflation. 

Many investors looking to preserve their wealth have turned to gold as a safe haven during economic downturns. Often, gold was delivered, with the gold price rising with the cost of living as equity markets slumped and the spending power of the U.S. dollar dwindled.

Pros

• Hedge against inflation 
• Portfolio diversification
• Safe haven to preserve wealth 
• Tangible asset
• Liquidity

Cons

• Cost of storage and insurance 
• Not income-generating
• Fluctuating prices

Investing in Bitcoin

Satoshi Nakamoto launched Bitcoin (BTC) as the first cryptocurrency in January 2009. It is digital money that allows peer-to-peer transactions across the internet without an intermediary (such as a bank or government authority). 

All transactions are secured by and recorded on the digital ledger blockchain. If you have a computer, you can invest in Bitcoin by purchasing it directly from the blockchain, through a cryptocurrency exchange or as an exchange-traded fund (ETF). As of Jan. 14, 2025, Bitcoin had a market cap of $1.90 trillion. 

Pros

• Accessible to anyone
• Anonymous ownership
• Decentralized currency
• Potential high returns
• Potential hedge against inflation

Cons

• Volatility 
• Lack of regulation 
• Potential for losing access to coins

Comparing Gold vs. Bitcoin

With Bitcoin often called “digital gold,” comparing gold vs. Bitcoin seems natural. The two alternative investments present some similarities but are more different from alike. Here’s a look at Bitcoin vs. gold.

Liquidity

Gold can be bought and sold easily and its liquidity is similar to that of many global equities markets. The three major centers for trading gold are the London over-the-counter (OTC) market, the Commodity Exchange (COMEX) in the United States and the Shanghai Gold Exchange in China.

Bitcoin is available 24/7. Typically, its liquidity is comparable to gold's and Bitcoin ETFs are available on traditional stock markets. However, Bitcoin is volatile, especially when large coin owners buy and sell in the market. This unpredictability can counteract the advantages of Bitcoin’s liquidity. 

Volatility

Gold may be volatile in the short term but less so over time. Historically, gold is seen as relatively stable because of its status as a safe-haven asset, especially when the economy turns south. 

In its relatively short life, Bitcoin has demonstrated high volatility, with significant price swings up and down. This volatility has declined as Bitcoin has matured, but it is still far less stable than gold.

Regulation

Any global authority or international agreement does not govern gold. Instead, the entities involved in mining, processing and trading gold function under a loose grouping of regulations and rules set by the countries involved in these activities. 

The heart of the global regulatory framework is based on a 153-year-old U.S. mining law, with regulations on the environment, conflict and trading added over the years. A long list of federal agencies, including the Commodity Futures Trading Commission and the Internal Revenue Service, regulate some of the gold industry. Other countries have similar agencies that regulate gold.

As Bitcoin and other cryptocurrencies have grown, some oversight and control initiatives have emerged. However, regulations are still evolving. Consumers, investors and businesses must comply with constantly changing rules as governments try to balance innovation with protections. 

This is evident in the United States, as Congress and federal agencies grapple with competing priorities like protecting investors, preventing illegal activities and supporting financial markets. The direction of U.S. regulations may influence rules and laws globally.

Tax Liability

If you sell gold stocks or ETFs for a profit, you may have to pay capital gains taxes of 0%, 15% or 20%, depending on your income. These taxes apply if you held the equity for longer than 12 months. If not, your profits may be taxed as ordinary income. 

The IRS considers physical gold a collectible, so you may be taxed up to 28% when you sell it. The taxation order could also increase your profits' total tax liability. You also may owe the Net Investment Income Tax (NIIT) of 3.8% if you earn more than $200,000 a year as a single filer or $250,000 if married filing jointly. You may have to pay state and local taxes on top of federal taxes.

All cryptocurrency transactions, including Bitcoin, are taxable and you must report them to the IRS on your return. The IRS considers Bitcoin to be property, not currency. This means that your transactions may be taxed as capital gains or losses. 

If you’re a business owner and accept Bitcoin for payment, this income will be taxed based on the coin's fair market value at the time of the transaction and it must be included in your gross business income. 

Security

Gold bullion comes with a risk of theft. To protect your investment, keep your gold bars or coins in a home safe, a safe-deposit box or a storage vault. Home storage presents the highest risk of burglary, while a storage vault's advanced security features mean that this option presents the lowest risk.

The decentralized blockchain makes Bitcoin transactions secure. However, cybercriminals can attack the wallets and exchanges used for buying, selling and trading Bitcoin. You must choose the appropriate wallet – hot or cold – to store your Bitcoin. 

A hot wallet is software on a device connected to the internet and a cold wallet is an offline storage device. Consider maintaining strong passwords, using two-factor authentication and safeguarding your network with antivirus software.

Why Choose Between Gold vs. Bitcoin? Buy Both

While Bitcoin may be called “digital gold,” gold and Bitcoin investments have very few similarities, which means there is a good argument for investing in both. 

Many analysts recommend keeping alternative investments below 10% of your portfolio. Following this guideline can reduce your risk while potentially providing higher returns.

Frequently Asked Questions