Bitcoin (BTC 1.33%) has often been called "digital gold," supposedly able to preserve an investor's purchasing power from inflation. But for the most part, such claims have yet to face a real test.
Nonetheless, there's now one more piece of evidence suggesting that at least some investors are putting their money where their mouth is with regard to the cryptocurrency's merits as a safe haven. Here's what's happening and how it changes the calculus for these investments.
CRYPTO: BTC
Key Data Points
Shifting sentiment is very clear here
One way to gauge how enthusiastic investors are about an asset is to measure the inflows of money to exchange-traded funds (ETFs) that hold the asset. If people are eager to hold something like a cryptocurrency or a commodity, they'll allocate their capital to financial vehicles that allow them to hold that asset by proxy if anything might prevent them from holding it directly. For both gold and Bitcoin, such scenarios exist, so inflows to ETFs are a valid way to see what's in demand.
The data is revealing. The iShares Bitcoin Trust ETF (IBIT +2.27%) which just holds Bitcoin, saw net inflows totaling nearly $7 billion between the start of the year and May 6. In comparison, the SPDR Gold Trust (GLD +3.01%) which holds claims to physical gold, saw net inflows of $6.5 billion. This is a surprising finding, and it supports the thesis that Bitcoin is actually a store of value capable of protecting investors from some economic disruptions.
Image source: Getty Images.
Given the global economic uncertainty that has defined 2025 so far, you might expect that investors would prefer gold over a cryptocurrency.
After all, gold has a very long history of being valuable, unlike Bitcoin, and it's also useful in jewelry, electronics, and other items. Both assets are scarce, have the potential to preserve purchasing power in the face of fiat currency inflation, and require substantial capital expenditure to obtain and deliver to investors. The fact that investors have sought more exposure to the Bitcoin ETF than the gold ETF suggests that there might be something more fundamental that could have shifted about how investors see the assets, especially regarding its chances of stability during turbulent times.
Regardless of the cause, Bitcoin has performed well. Whereas the gold ETF's price has risen by 56% over the last three years, Bitcoin's has risen by 127%, and both have beaten the market's return of 27%. Another potential cause is the global trend of countries considering or actually creating Bitcoin reserves. Companies and institutional investors are adding it to their balance sheets, too.
In other words, gold's long history of use is all well and good, but I'd argue that it can't be expected to grow in the coming decades nearly as much as Bitcoin can as it enters what I think will be its biggest wave of adoption. After all, gold is already accepted as a store of value and as a commodity. And investors are probably counting on Bitcoin continuing to grow over the long term, regardless of any short-term problems that might arise.
NYSEMKT: GLD
Key Data Points
There's no need to choose one over the other
I truly believe that Bitcoin's role in the global financial system is only going to increase from here. Still, it's unclear if Bitcoin will ever overcome the fact that it's vastly more volatile than gold on a quarterly basis. It's even less clear whether its value will hold up in the event of a real crisis, one causing significant disruption across multiple countries.
That means there could be a home for both "digital gold" and actual gold in most investors' portfolios. Bitcoin will probably grow much faster, but it isn't as safe. And while gold won't be as volatile, it's important to recognize that it can still experience gluts and bear markets like other commodities.
Finally, keep in mind that Bitcoin is an asset that tends to mirror the liquidity of the global financial system. If there's a deflationary shock of some kind, it might end up sucking the wind out of Bitcoin's sails and make investors seriously question the validity of the "digital gold" moniker.
