These two assets always seem to generate comparisons.

It’s been a great time to be an owner Bitcoin (Bitcoin 0.57%). Since the start of 2023, the leading digital asset has soared 307%. The approval of spot exchange-traded funds (ETFs), as well as the April halvedwere recent catalysts.

Investors may be surprised to learn that gold is also close to records thanks to the bullish sentiment. Bitcoin and this precious metal are often compared to each other. But the leading cryptocurrency is a better asset to own.

How Bitcoin and Gold Are Similar

Market participants like to compare Bitcoin and gold. So it might be worth first understanding some similarities between the two.

Scarcity is something investors should be aware of. Burned into Bitcoin’s software is a hard supply limit of 21 million coins. And in the earth’s crust there is a certain amount of gold.

The prices of assets that have a fixed supply should, in theory, rise as demand also grows. This basic economic principle helps explain why gold has been seen as a popular store of value over long periods of time.

Furthermore, there is some utility here as well. Gold is primarily used in jewelry, but is present in certain industrial settings. Likewise, Bitcoin’s value arises from being a completely decentralized network, with no single entity in charge, thus reducing transaction costs and sending money to someone across the world.

The advantage of Bitcoin

At a high level, it’s easy to see how Bitcoin and gold are scarce. Furthermore, both are useful in different situations. But if we dig deeper, we can easily see how top cryptocurrencies are a superior investment.

Let’s return to the topic of scarcity. Investors may think that gold has a fixed supply limit, but that couldn’t be further from the truth. According to the US Geological Survey, 77% of all gold in the Earth’s crust has been mined. Consequently, there is still a considerable amount of gold to be mined.

If, for any reason, demand for gold skyrocketed in a short period of time, mining companies would be encouraged to invest aggressively to expand their operations in order to reach areas around the world that might otherwise be difficult to access. In other words, the gold supply schedule could be changed based on demand trends.

This is where Bitcoin stands out. It is absolutely finite. The previously mentioned 21 million coin supply cap is highly unlikely to change unless Bitcoin stakeholders want to completely undermine the value proposition of the entire network. Because Bitcoin’s supply schedule cannot be changed, its price is often volatile.

Compared to gold, which is a physical commodity, Bitcoin is a digital asset. And that means it’s easier to store and transport. Bitcoin can also be divided into much smaller units while still being acceptable in certain transactions. Try going to a restaurant and cutting a gold coin to pay the bill.

Investors should also not ignore the store of value debate, which is probably the most viewed aspect when comparing Bitcoin and gold. Here, Bitcoin shines brighter than the precious metal.

At the end of the day, saving and investing means increasing purchasing power over time. Over the past five years, the price of Bitcoin has soared 718%. This means that a $1,000 investment in June 2019 would be worth almost $8,200 today.

The price of an ounce of gold, on the other hand, only increased by 73% during the same period. And this phase included major disruptive developments such as the pandemic, inflationary pressures, higher interest rates and general economic uncertainty.

In the future, Bitcoin and gold will likely continue to draw comparisons. But I think in the next five or 10 years, the leading cryptocurrency looks like the best investment opportunity.

Neil Patel and its clients do not have a position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.

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