Bitcoin vs. Gold: Which Is the Better Investment?

Bitcoin is making waves, climbing towards $70, 000, while gold hit a record $2, 733 per ounce. Investors are flocking to these assets due to global uncertainty, like the Fed’s rate cuts and tensions in the Middle East. But which one is a better investment? Matthew Hougan, Chief Investment Officer at Bitwise, believes Bitcoin has the edge. He explains that while both Bitcoin and gold have limited supplies and operate independently of central banks, Bitcoin’s potential for high returns makes it more appealing to risk-tolerant investors. Gold, on the other hand, offers stability and is seen as a safe haven during economic downturns. Hougan uses a soup analogy to illustrate their portfolio impact—gold is like water, subtly stabilizing a portfolio, while Bitcoin is like pepper, making a big difference even in small amounts. Data from Bitwise shows that adding a small percentage of Bitcoin to a traditional stock-and-bond portfolio can boost returns significantly with minimal risk increase. Meanwhile, Bitcoin ETFs have been incredibly successful, accumulating over $21 billion in net flows since their SEC approval in January 2024. In comparison, it took gold ETFs five years to reach the same level. Hougan also notes the potential of Ether ETFs, predicting they could drive up Ether’s price beyond $5, 000, likening it to a tech play like Apple or Nvidia. The choice between Bitcoin and gold depends on an investor’s risk tolerance and financial goals. Bitcoin offers higher returns but more volatility, while gold provides stability. Hougan advises keeping stocks and bonds but making room for Bitcoin, given its unique portfolio enhancements and significant upside potential.