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The performance divergence of these two unique assets is on full display.
From the start of 2013 through the end of 2022, the price of an ounce of gold rose by just 8%. Since then, the price has surged 175% higher (as of Jan. 30). Something is clearly going on with the shiny precious metal. And investors are taking notice.
Bitcoin (BTC 0.48%), the world’s first and most valuable cryptocurrency, is often viewed as a digital version of gold and has been an impressive asset historically. Its price is up an astonishing 22,770% in the past decade. However, it’s been losing the race against gold over the past 12- and 24-month periods. And the crypto is down 33% below its peak.
Should Bitcoin investors be worried right now?
Image source: Getty Images.
Gold is setting the bar high
Investment professionals argue that gold is a safe-haven asset and that it should be added to portfolios during times of extreme uncertainty because it’s not correlated to other asset classes, has a scarce supply, and is neutral. The last year has provided gold with the perfect backdrop to support its monster performance.
This White House administration has certainly shaken things up when it comes to trade and geopolitical tension, most notably with ongoing changes to tariffs, relations with China, and the recent spat with European leaders over Greenland.
It also doesn’t help that the U.S. continues to run massive trade deficits, holds a record federal debt burden of $39 trillion, just started quantitative easing, and could resume interest rate cuts under a new Fed chair. This weakens confidence in the U.S. dollar, which is at its lowest level in four years versus a basket of major currencies.
Central banks around the world want to lessen their dependence on America, so they’ve been buying gold. The gold they own is now worth more than their U.S. Treasury balances.
Today’s Change
(-0.48%) $-371.62
Current Price
$77337.00
Key Data Points
Market Cap
$1.5T
Day’s Range
$77474.00 – $79131.00
52wk Range
$74591.71 – $126079.89
Volume
54B
The best long-term investment is clear
One thing is obvious from Bitcoin’s performance lagging gold recently: The top cryptocurrency is still viewed as a risk-on asset. This tells me that it still has a long way to evolve into a more widely accepted store of value.
It makes sense, though. Bitcoin’s ascent was first driven by retail investors. Institutions and large buyers came on the scene much later. For the dominant digital asset to graduate to the next level, it will eventually have to win over central banks around the world, which have substantial buying power. This will take time.
This can be discouraging for Bitcoin bulls, but investors shouldn’t take signals from short-term trends. I believe Bitcoin still has tremendous upside, given that it’s scarcer than gold and is purely digital. And now is a great opportunity to buy the dip.
When looking at gold or Bitcoin as a portfolio addition over the next five or 10 years, the best long-term investment is strikingly clear. Bitcoin might not be as proven as the precious metal is, since it’s been around for less than two decades.
But consider which way the world is moving. There’s almost no chance that in the future, the global economy will reverse course, go backward, and become more analog. Society is only going to become more digital and technologically driven. This sets the scene for Bitcoin to shine.