Bitcoin vs. Gold ETFs

For the past several centuries, gold has been sought as a reliable asset. People have been using it as a form of money, jewelry, and a store of value. Gold is known for its stability during tough economic times, whether there is political uncertainty or inflation.

However, owning physical gold is not always easy. Insuring gold, storing it securely, or even selling it whenever needed is difficult. Several investors find these tasks to be too heavy for daily investment needs.

Recognizing these challenges, financial markets sought a way to make gold investment more accessible and liquid, which led to the creation of Gold ETFs.

Gold ETFs: Bridging the Gap Between Physical Gold & Modern Investing

Gold ETFs were introduced in 2003 (Gold Bullion Securities) and were later made popular with the SPDR Gold Shares’s launch (GLD) in 2004. These ETFs allow investors to trade shares that are backed by physical gold without having to manage the burden of security, handling, or storage.

While revolutionary at the time, Gold ETFs remain rooted in the financial system—vulnerable to custodians, vaults, and intermediaries to work.

Thus, Bitcoin emerged in 2009 as a fully digital & decentralized alternative. Its underlying blockchain technology allows investors to make peer-to-peer value transfers that are secured by cryptography. Both Bitcoin and gold have a limited supply, and that’s the reason people call it “Digital Gold”.

Evolution of Bitcoin

The evolution of Bitcoin has been quick and transformational. Let’s now look at some intriguing facts.

✅ 2010: The first Bitcoin transaction occurs when 10,000 BTC is exchanged for two pizzas.

✅ 2017: Institutional interest increased when the CME Bitcoin futures were introduced.

✅ 2024: The United States approves spot Bitcoin ETFs to attract billions of dollars in investment within a few weeks.

By December 2024, Bitcoin achieved the $100,000 value milestone, and by January 2025, it reached an all-time high of $109,000.

Bitcoin’s infrastructure is decentralized, borderless, and censorship-resistant—qualities Gold ETFs cannot match. 

Furthermore, the approval of Bitcoin ETFs in late 2023 and early 2024 marked a turning point, simplifying Bitcoin investment for mainstream and institutional investors. By the end of 2024, Bitcoin ETFs in the U.S. managed over $106.7 billion in assets, surpassing some gold ETFs.

How Do They Perform?: Stability vs. High Growth

Bitcoin provides high potential returns and comes with some benefits of its own. Its excessive price movements make it appealing to analytical investors looking for big gains. However, they might not be suitable for investors seeking a stable market. Contrary to this, Gold ETFs provide reliable & steady performance, which makes them a safe investment choice. Bouri et al. (2017)

Comparative Performance During Market Stress, Adapted from findings in Bouri et al. (2017)

The chart demonstrates that while Bitcoin can post considerable rebounds, it is equivalently exposed to large drawdowns. It might have swings that often might exceed ±20%, which might further underscore its higher volatility and potential for greater losses and gains. At the same time, returns from gold remain in a tighter ±3% band, which reinforces its role as a rather stable haven in turbulent markets.

Below is a table that shows how gold and Bitcoin have performed over the years:

According to the findings revealed in the table above, Gold has provided consistent, moderate returns, making it a stable investment choice for those who value security and predictability. On the other hand, Bitcoin has demonstrated extreme growth potential with significantly higher returns, but it also comes with some volatility.

• 2010–2024: Bitcoin rose from $0.08 in 2010 to $42,000 by 2023, delivering a 52,500,000% return. In 2024, Bitcoin continued its rally, surging 125% to end the year at approximately $93,429.

• Annualized Return (10-Year): The annualized return of Bitcoin has been nearly 150%, surpassing the 6% return of gold. In 2024, Bitcoin returned with 113%, far exceeding 28.7% of gold and outperforming major indices, such as the S&P 500 (23.7%).

• Post-2020 Surge: Bitcoin surged 600% after the pandemic, while gold increased by only 25%. In 2024, the performance of Bitcoin remained dominant as its returns were approximately 113% in comparison to the 28.7% of the gold ETF.

• Performance During Crises: In 2022, gold declined by 1% amid inflation fears, while Bitcoin increased by +150% in 2023. When it comes to 2024, Bitcoin maintained its status as a top-performing asset by reaching an all-time high of $73,000 in March before closing the year at a record $93,429.

• Bitcoin as an Inflation Hedge: Recent studies show that Bitcoin’s ability to protect against inflation varies by country. Moreover, some investors believe that Bitcoin is a better hedge for inflation than traditional investments. That’s why investors who want to protect their funds from inflation are considering adding Bitcoin to their portfolios. (Kolawole Ibrahim Gbolahan, Vilnius Gediminas Technical University and Michael Weber, NATIONAL BUREAU OF ECONOMIC RESEARCH)

• Portfolio Diversification: Gold is stable, along with the low to negative correlation with stocks and bonds. This makes it a good option for diversifying a portfolio. Alternatively, the correlation of Bitcoin with traditional assets (Like Bonds and Equities) has changed over time. While it once had a low correlation, it shows a low positive correlation with mutual funds and ETFs. (Jordan Doyle and Urav Soni, Enterprising Investors)

Accessibility and Barriers: Gold ETFs vs. Bitcoin

Gold ETFs and Their Limitations

Gold ETFs are popular because they simplify investing in gold. You can trade shares of a Gold ETF via your regular stock brokerage account without having to worry about how to secure or store physical gold. However, there are a few drawbacks:

• No Physical Gold Ownership: When you invest in a Gold ETF, you don’t own any gold. Instead, you have shares that represent a gold claim.
• Management Fees: These funds charge fees to cover the cost of managing the fund. Over time, these fees can add up and reduce your returns.
• Influence of the Market: Gold prices can be affected by big market trends and global events, which might not always work in your favor if you are looking for a completely stable asset.

Bitcoin: Easy and Direct Access

Bitcoin makes it easy to invest. You can buy, sell, or hold Bitcoin on any reputable platform, such as Coinbase, with an internet connection only. There’s no need for a broker or bank, and you may directly control your Bitcoin through a digital wallet. Here are a few key benefits you must know about:

• Direct Ownership: When you purchase Bitcoin, you directly own it in your soft or hard wallet. No middleman is involved.
• Lower Costs: Many online platforms charge lower fees than traditional brokers, making transactions cheaper.
• Decentralization: No single entity, bank, or government controls Bitcoin, which gives a sense of security and freedom to the investors.
• Fast Transactions: You can complete Bitcoin transactions fast, and this is true across international borders as well.

All these factors have made Bitcoin appealing to a younger and tech-savvy generation that values simplicity and direct control over their assets.

Institutional Adoption: Mainstreaming Digital Assets

Gold ETFs and Traditional Investors

For the past many years, gold has been the go-to investment for hedge funds, banks, and large institutions. Gold ETFs helped in bringing gold into the mainstream as they offered an easy and familiar way of investing in gold. The stable performance and long history of gold made these funds a reliable part of several portfolios.
Notable examples for this include the SPDR Gold Shares (GLD), which delivered a 3-year annualized return of 13.84% as of January 2025. Moreover, the iShares Gold Trust (IAU) has provided a 3-year annualized return of 48.21% till now.

Bitcoin Joins the Big Leagues

In the past few years, institutional investors have been keeping their eyes on Bitcoin. With the approval of Bitcoin ETFs in early 2024, big players such as Fidelity & BlackRock offer Bitcoin investment products. By early February 2025, the integrated assets in United States-based Bitcoin ETFs had reached approximately $43 billion.

For instance, BlackRock’s iShares Bitcoin Trust got $38+ billion in inflows. Also, it reached approximately $52.9 billion by January 2025.

Bitcoin vs. Gold ETFs: A Changing Trend

Gold ETFs have long been a popular investment, but Bitcoin ETFs are catching up quickly. As per Investopedia, BlackRock’s Bitcoin ETF has surpassed its gold ETF in assets, despite the gold ETF being almost 20 years old. The reason for the occurrence of this shift is due to bitcoin being digital, scarce, and easy to trade. This makes Bitcoin an excellent choice for modern investors.

As of November 7, 2024, iShares Bitcoin Trust (IBIT) outperformed iShares Gold Trust (IAU) by 33%, holding over $33 billion in net assets compared to IAU’s $32.9 billion. This is an important achievement, considering IBIT launched in January 2024, while IAU has been trading since 2005. This milestone was mentioned by Nate Geraci, president of The ETF Store, in a post on the X platform on November 8, 2024

As shown in the graph below, Bitcoin ETF holdings have steadily increased while gold ETF holdings have started to decline. This emphasizes how Bitcoin is growing as a strong option as compared to traditional assets.

Source: ByteTree

What Does the Future Hold for Investors?

Looking ahead, the future for investors in both Gold ETFs and Bitcoin lies in embracing a diversified approach that leverages the strengths of both assets. Gold ETFs provide a stable and proven store of value with broad market acceptance. Thus, Gold ETFs are a reliable choice during uncertain times. Meanwhile, Bitcoin offers great opportunities due to lower transaction costs, decentralized nature, and fast growth.

By combining these investments, investors can hedge against market fluctuations while capitalizing on emerging trends in digital finance, positioning their portfolios to benefit from both traditional stability and innovative growth.

The Bottom Line

Choosing a reliable option between Gold ETFs and Bitcoin relies on your risk tolerance as well as personal financial goals. If you value a proven store and stability, people see gold as a solid choice. But if you are excited by the freedom of a decentralized asset and the freedom of a decentralized asset, Bitcoin may prove to be the right path for you. Being aware of the strengths of both investment options will help investors build a balanced & resilient portfolio in the ever-changing investment landscape.