Wondering whether to invest in gold or Bitcoin in 2025? Discover the key differences, risks, and advantages of each to make a smarter financial decision.

Bitcoin has skyrocketed in popularity for its ability to bypass traditional banks and offer fast, borderless transactions. Its potential for high returns has captivated investors – despite its infamous volatility and rapid price swings. But with Bitcoin’s growth comes the question: should you invest in Bitcoin or gold? Well, your choice depends on your goals, risk tolerance, and understanding of each asset. Let's explore the key pros and cons to help you decide which is the right fit for your portfolio – and the potential benefits of investing in both.

Why should you choose gold?

Gold’s long-standing reputation as a safe-haven investment is well-established, with centuries of history as a reliable store of value.

According to David Rosenberg of Rosenberg Research, gold offers one-fifth the volatility of Bitcoin and lacks the same competition risk. Moreover, gold's role as a hedge against economic uncertainty has been consistent, unlike Bitcoin, which is relatively new.

There’s also the possibility that regulation could one day undermine Bitcoin’s worth, while gold's stability across political and economic changes remains steadfast. For example, in 2021, China's central bank has announced that all transactions of crypto-currencies were illegal, effectively banning digital tokens such as Bitcoin. In the wake of the announcement, the price of Bitcoin fell by more than $2,000 (£1,460).

Meanwhile, although the price of gold fluctuates, it tends to retain its value over time.

Benefits of Investing in Gold

Gold has been a safe store of wealth for thousands of years, with a proven track record of outperforming inflation. It is a tangible asset with a limited supply, making gold investment a solid long-term choice. Gold also tends to rise in value when stocks and shares fall, providing diversification and reducing exposure to market volatility. In 2024, the price of the yellow metal soared by around 30% to $2,648 per ounce.

Drawbacks of Investing in Gold

While gold is a stable long-term asset, it may not suit investors seeking short-term liquidity. Unlike stocks or bonds, gold doesn't generate income through dividends, and its value is often influenced by the strength of the U.S. dollar. Investors dealing in other currencies may face additional risks due to currency fluctuations.

Why should you choose Bitcoin?

Bitcoin has a number of benefits. It can lead to high returns, especially amid its growing global adoption. According to Daniel Ives of Wedbush Securities, Bitcoin's liquidity and ease of trading make it a compelling asset .

As cryptocurrency adoption grows among businesses, Bitcoin could become a standard payment method, though its regulatory risks and volatility remain significant challenges.

Benefits of Investing in Bitcoin

Bitcoin investment offers several advantages, such as independence from government control and the potential for growth during economic turbulence. Like gold, Bitcoin's limited supply enhances its value over time. The blockchain technology behind Bitcoin also boosts security, reducing the risk of fraud and strengthening public trust.

Drawbacks of Investing in Bitcoin

Despite its upside, Bitcoin's extreme volatility is a key drawback. The Bitcoin price is far more unpredictable than the S&P 500 and gold prices, making it a high-risk asset. The lack of regulatory oversight in the crypto market exposes investors to fraud and scams, while Bitcoin's speculative nature means its value isn't based on any intrinsic asset, unlike gold.

As of 27 January 2025, the cryptocurrency market is experiencing significant turbulence, with Bitcoin’s price recently dropping below the $100,000 mark. In part, this is because of the introduction of an AI tool called Deepseek, which can analyse market trends and predict price movements. Forecasts generated by Deepseek suggested adverse market conditions, prompting traders to sell off their assets in anticipation of further declines.

Are there any similarities between gold and Bitcoin?

It may come as a surprise to many, but gold and Bitcoin share some key similarities that make them attractive to investors. Both assets have limited supply, which supports their value. Gold has been mined steadily, while Bitcoin's supply is capped at 21 million coins. Both can also serve as alternatives to fiat currencies and potential hedges against inflation.

But, there are also some important differences between gold and Bitcoin, too.

Physical vs. Digital: Gold is a physical asset with intrinsic value, while Bitcoin is a digital asset, subject to technological risks and regulatory challenges.

Volatility: Gold is favored by investors seeking stability, while Bitcoin’s higher volatility means it carries more risk.

Market Correlation: Gold's price often moves inversely to the stock market, providing diversification during downturns. Bitcoin’s market correlation is less clear, making its diversification benefits questionable.

Gold versus Bitcoin

Bitcoin can offer high-reward potential, but its volatility also means greater risk. For investors with a higher risk tolerance, Bitcoin can provide exposure to the emerging cryptocurrency market. However, its inclusion in an investment portfolio should be balanced with more stable assets like gold.

Gold remains a compelling choice for long-term savings due to its stability, intrinsic value, and role as a hedge against inflation. Its inverse correlation with equities makes it a powerful tool for diversification, especially during economic uncertainty.

Additionally, gold's universal acceptance and role as a reserve asset held by central banks worldwide give it unmatched credibility compared to Bitcoin.

Both gold and Bitcoin can play valuable roles in a diversified portfolio. Gold offers stability, a proven track record, and a hedge against market downturns, making it ideal for long-term savings. Bitcoin, while volatile, provides exposure to the high-growth digital economy.

So, rather than seeing gold and Bitcoin as rivals, investors should consider them complementary assets. Together, they can balance each other out, enhancing portfolio resilience and growth potential. By understanding the unique benefits and risks of each, investors can make informed decisions aligned with their goals and risk tolerance.

If you want to add gold to your investment portfolio, check out our guide to buying precious metals here. Head to GOLD AVENUE to invest in gold from trusted, reputable retailer.