Gold vs. crypto is a hot debate as both investments can outperform stocks. Each asset has fiercely loyal investors, such as “gold bugs” and “crypto bros,” who only invest in physical gold or digital currencies, respectively.
I invest in gold and crypto as I like their distinct investment traits. Below are the similarities and differences between these two alternative assets so you can decide to hold one or both.
Find a crypto IRA company to help you take control over your retirement savings.
Investing in Gold
Gold has a long and illustrious history dating back to Biblical times as a store of wealth.
Over the centuries, governments and businesses have used gold coins for daily transactions. It’s also used in electronics as it doesn’t corrode but conducts electricity.
The relatively rare, shiny metal has served as currency for nations, hence the Gold Standard. As the saying goes, “Gold is the money of kings, silver is the money of gentlemen.”
Some of gold’s most appealing investment purposes include:
- Currency hedge: Gold has near-universal recognition and is often preferred to settle transactions over devalued fiat currencies or in the face of geopolitical strife.
- Inflation hedge: Investors consider it a safe-haven asset as it usually holds its value better during inflationary times than other commodities and currencies.
- Physical ownership: You may prefer owning a tangible asset you can touch and sell back to a local dealer or ship to an online buyer.
- Price stability: Gold is considered a reliable store of value as its spot price is typically less volatile than stocks and commodities. It is not ideal for short-term trading.
- Rarity: A limited supply and consistent demand help preserve its market value.
Even in our present age of paper money, sovereign nations, big banks, and individual investors still buy physical gold for wealth preservation.
Gold investment options
You can invest in gold, physically and digitally:
- Physical gold: Own gold bars, coins, and jewelry in a home safe or a secure off-site location. It is available in whole ounces and partial ounces, such as 1/10 oz. coins.
- Fractional gold: Purchase fractional ownership in gold bullion that’s stored at a third-party vault. You can convert it into real bars or coins for home delivery.
- Gold stocks: Invest in gold-related stocks and funds through a brokerage or retirement account. Some track gold’s spot price, while others are mining companies.
With gold’s spot price above $3,000, you may consider buying fractional coins and bars.
I like these budget-friendly investment options because they still allow for physical ownership with small amounts of money.
For many, gold is a multi-year investment as it takes time to increase in value and offset transaction premiums and taxes.
The price stability is appealing for risk-averse investors who don’t need to sell for at least five to seven years.
You can also trade gold-linked ETFs for short-term profits since you don’t have to take physical ownership. However, stocks and crypto typically have more profit potential.
Investing in Crypto
Cryptocurrency, specifically Bitcoin, has been one of the best-performing asset classes since its introduction in 2009 as an investment option.
Much of this explosive growth stems from Bitcoin being the first digital alternative asset with multiple purposes.
Some consider crypto as similar to investing in tech stocks with similar exposure to emerging technology. Additionally, both tend to do better during bullish stock markets.
It doesn’t require lots of storage space like gold. Instead, this asset is entirely digital and you can store your private keys in a cold wallet or hot wallet.
You conduct transactions instantly without shipping or asset verification delays.
Reasons to consider investing in cryptocurrency include:
- Currency hedge: Bitcoin has a finite supply, which prevents currency devaluation. This trait can also make it a good hedge against inflation.
- Decentralization: Governments and central banks do not mint cryptocurrency like fiat money. As a result, businesses and individuals can make purchases and transfer assets on an independent blockchain network without traditional banking barriers.
- Efficiency: The digital asset can be traded 24/7, doesn’t require physical storage, and typically has fewer fees and quicker transaction speeds than bank transactions.
- Growth potential: Investors can realize more potential gains than with established investments, as crypto’s market cap is small yet shows promising growth.
- Real-world applications: Cryptocurrency’s primary function is digital payments. However, some protocols use the technology for data processing and other business administrative tasks.
While the true identity of founder Satoshi Nakamoto remains a mystery, you can read the Bitcoin white paper.
This document helps you understand the core mission of this asset, which is to reduce reliance on traditional finance and investment options for building wealth.
Crypto investment options
In most cases, you will buy cryptocurrency from an exchange or self-directed IRA so you have direct access to your private keys.
ETF and mutual fund companies now offer crypto-linked funds that track a token’s spot price within your employer 401(k) or stock portfolio.
There are three different types of cryptocurrency you can invest in:
- Bitcoin: This is the gold standard of cryptocurrency with the most price stability and consistent investor demand. They are ideal for long-term price appreciation but you can also profit from short-term swings.
- Altcoins: These tokens have multiple use cases with newer technology that makes them more efficient than Bitcoin. However, their market cap is significantly less and the prices are more volatile. They are ideal for short-term trading.
- Stablecoins: These projects serve as a store of value, maintaining a 1:1 ratio to a collateral asset, such as the U.S. dollar. Each token is cash-like, usually worth $1 each, and won’t appreciate in value, although you can earn staking rewards.
Individuals and businesses use it for short-term and long-term investment strategies. For example, you may hold Bitcoin for many years but trade altcoins during cyclical bear markets.
Consider using a tax-advantaged cryptocurrency IRA for your long-term holdings to reduce your taxable gains. Taxable accounts with an exchange are better for non-retirement investing.
Gold vs. Crypto: Key differences
| Gold | Crypto |
|---|---|
| Physical bullion and fractional ownership | Digital ownership |
| Bars, coins, and gold-linked securities | Thousands of tokens and stablecoins |
| Inherently illiquid | Instant liquidity |
| Expensive spot price | $1 minimum investment |
| Average premiums are between 3% and 10% | Average trading fees of 1% or less |
| Self-custody and custodial vaults | Custodial wallets or self-custody via hardware wallets and software wallets |
| Taxable and IRA-eligible | Taxable and IRA-eligible |
| Highly regulated | Evolving regulations |
| Industrial and financial uses for thousands of years | Financial and technology processing uses |
| Low volatility | Very volatile & not recession-tested |
| Doesn’t earn dividends | Can earn staking rewards |
| Best for long-term wealth preservation | Better for short-term trading |
Gold is primarily a tangible asset that you self-custody or store at a professional vault.
It can be cumbersome to sell your physical bullion as dealers may need to verify authenticity and require shipping. These burdens help minimize volatility for long-term strategies.
Several services offer fractional gold ownership with minimum investments as low as $10.
Unlike gold commodity ETFs, which also track the spot price, you can convert your shares into physical bullion once you reach a qualifying balance.
Crypto is better for short-term trading as this asset class is inherently volatile but the best tokens have more growth potential than precious metals.
Moreover, you have thousands of investment options and lower trading fees. Volatility keeps decreasing as more investors and investment firms increase long-term exposure through spot ETFs.
Consider a crypto Roth IRA for tax-optimized short-term trading and long-term holdings.
Bitcoin vs. Gold
| Gold | Bitcoin |
|---|---|
| Physical ownership | Digital ownership |
| Higher minimum investment | Low minimum investment |
| Illiquid | Instant liquidity |
| Less risk and potential price appreciation | More risk and potential price appreciation |
| Higher premiums | Lower trading fees |
| Taxable and IRA-eligible | Taxable and IRA-eligible |
| Best for long-term strategies | Short-term and long-term strategies |
Our gold vs. Bitcoin comparison examines the best assets in precious metals and cryptocurrency, respectively.
Both dollar alternatives have healthy investor demand, promising growth potential, limited supply, and are less volatile than their peers.
Physical gold is best if you have a long-term investment horizon or are risk-averse.
The dealer premiums and inherent illiquidity make it challenging to make a quick buck as gold’s spot price is relatively stable and usually doesn’t experience rapid price swings.
Bitcoin is the least volatile cryptocurrency but it still provides sufficient volatility for profitable short-term trades.
However, you can also allocate some of your funds for long-term growth as Bitcoin’s price has gradually increased since its inception.
A Bitcoin IRA is one of the best ways to hold the best-performing crypto assets for many years and only pay taxes once on your balance.
Which one is right for you?
Gold and crypto are both effective hedges against dollar devaluation and stock market volatility. The best reasons to invest in either asset are for different reasons.
Many invest in gold because:
- Longevity: It has been a store of wealth for thousands of years. Central banks, governments, institutional investors, and retail investors continue to buy today.
- Physical ownership: Many investors like holding tangible assets they can physically sell or exchange versus a digital asset that cannot be seen or touched.
- Multiple investment options: You can choose from coins or bars in whole and fractional ounces. Gold collectors may also acquire bullion from specific mints or production years, although it’s best to calculate your income potential on the melt value.
- Gold-linked commodity ETFs: Indirect ownership is also available through funds tracking the spot price. This investment option is more convenient and better suited for short-term investments.
- Inflation hedge: Investors tend to prefer gold during inflationary times and in countries with weak currencies. Its value tends to increase during these situations.
- Reduced volatility: Gold isn’t risk-free, yet it tends to endure market uncertainty better than stocks and crypto with less downside risk.
Gold is best when you have a multi-year investment period. You may also like this benefit if you have a moderate or conservative risk tolerance and want a tool for wealth preservation.
Cryptocurrency is a compelling investment option when you have a higher risk appetite:
- Emerging asset class: Early crypto investors have outperformed the stock market. While new investors are less likely to experience similar gains, there is still plenty of room to run in high-quality tokens as more people start investing in cryptocurrency.
- Portability: Your private keys are location-independent using a hot wallet. You don’t have to spend time or money shipping your assets or wait days to sell your metals. Crypto-based transactions settle instantly 24/7 with minimal fees.
- New technology: Cryptocurrency is a more efficient and cheaper way to conduct global payments and perform automated tasks than traditional platforms. You can profit as more people use a particular currency for transactions.
- Staking rewards: Stablecoins and certain altcoins can earn staking rewards to generate passive income from your long-term holdings. Unfortunately, gold doesn’t earn interest and relies solely on price appreciation to generate gains.
- Many investment options: While you may decide to stick to Bitcoin, most crypto exchanges offer hundreds of tokens for diversification and trading opportunities. Tracking the latest crypto trends can help you spot potential areas to profit.
Should I buy gold or crypto?
Ultimately, the best crypto vs. gold investment option depends on your goals and risk tolerance. Although owning both can help optimize your investment gains when stocks underperform.
Gold tends to be better if you want to avoid risk or want a long-term asset that doesn’t require frequent trading. Many successful precious metals investors start with small coins and bars.
Crypto usually requires a short-term trading mindset and an aggressive risk tolerance to profit. Simultaneously, Bitcoin and stablecoins can match long-term strategies.
One option is to start with 1% of your retirement assets with the best crypto IRAs. This small balance allows you to get exposure to digital assets with high growth potential while responsibly managing downside risk.
FAQs
Will crypto ever replace gold?
Cryptocurrency won’t fully replace gold, which is a time-tested store of value for millennia. However, it can very well remain the preferred investment vehicle for younger, tech-savvy generations and investors seeking fractional ownership.
Will Bitcoin ever surpass gold’s market cap?
It’s possible in the long term, although Bitcoin has several challenges to overcome. First, Bitcoin is approximately 10% of gold’s market cap.
Furthermore, nations and institutional investors will need to increase their allocation through strategic reserves and similar measures.
Should I even compare gold to crypto?
It’s worth comparing as gold and crypto have their distinct investment advantages and risks. Since the assets have a historically weak correlation, their investment performance differs.
Owning both can help diversify your portfolio.
Find a crypto IRA company to help you take control over your retirement savings.
