Why Gold Still Reigns Supreme in the Age of Bitcoin

In the latest episode of the Money Metals Midweek Memo, host Mike Maharrey explored the rocky relationship between Bitcoin, gold, and their roles in today’s financial world. 

Sharing personal stories, market trends, and insights, Maharrey broke down the similarities and differences between these two assets. He also looked into Federal Reserve Chairman Jerome Powell’s comments on Bitcoin and gold, offering a down-to-earth perspective for sound money advocates.

Mike’s Bitcoin Journey: A Personal Story

Mike Maharrey started the episode with a relatable story from 2016, when he received a bonus payment of one Bitcoin worth about $400 to $450. At the time, he used most of it to buy a used laptop for $350, leaving a small fraction of Bitcoin in his wallet. Like many early Bitcoin owners, Maharrey didn’t fully understand its future potential, and he largely forgot about it until the 2017 bull market pushed the price to nearly $20,000.

Excited by the sudden value increase, Maharrey sold most of his remaining Bitcoin when it dipped to the $13,000–$14,000 range. He kept a tiny bit but admitted that hindsight makes his decision bittersweet, especially as Bitcoin now trades near $100,000. Reflecting on this experience, Maharrey talked about the challenge of timing markets and the “what if” scenarios that many investors face.

The Current State of Bitcoin

Bitcoin’s recent market moves have been nothing short of dramatic. Following the U.S. presidential election, Bitcoin jumped from $69,363 to over $100,000, peaking at $103,000 before sliding back to around $97,500. While the cryptocurrency continues to attract attention, its wild price swings remain a defining feature.

Maharrey explained several reasons for Bitcoin’s recent ups and downs. Microsoft shareholders recently voted against holding cryptocurrency on the company’s balance sheet, which triggered a market selloff. 

On top of that, Google’s release of its Willow Quantum Computing chip has raised new worries about blockchain security in the long run. Despite its growing acceptance, Bitcoin remains highly unpredictable.

However, Bitcoin’s annualized volatility has been decreasing as the market grows and more institutions get involved. In 2021, volatility stood at 81%, and in 2024, it has stayed below 80%. While still higher than most assets, this signals that Bitcoin is becoming somewhat more stable.

Bitcoin vs. Gold: Similarities and Differences

Maharrey spent time looking at Jerome Powell’s recent remarks comparing Bitcoin to gold. While both assets share some traits—like limited supply and resistance to central bank meddling—they are fundamentally different.

Bitcoin’s erratic price movements make it far less reliable as a “safe haven” compared to gold. Its price, often driven by speculation and tech developments, is not typical of a stable store of value. 

For example, Bitcoin’s market capitalization of $1.92 trillion is still much smaller than gold’s $18 trillion, which reflects gold’s stability and long-standing role in the financial system.

Maharrey also pointed out that Bitcoin behaves more like tech stocks than traditional stores of value. Its tech-driven nature and speculative appeal make it act like a high-risk, high-reward asset. 

Meanwhile, gold has been trusted for thousands of years as a dependable way to preserve wealth during uncertain times.

Interestingly, studies show little to no long-term connection between Bitcoin and gold. A Bloomberg report noted that their average long-term correlation is close to zero, which means they can work well together in a diversified portfolio. 

This highlights the potential benefits of holding both as part of a well-rounded investment approach.

The Case for Diversification

Maharrey strongly encouraged listeners to spread their investments, warning against the risky “all-in” attitude often seen among Bitcoin enthusiasts. He emphasized the dangers of putting all your money into one asset, especially one as unstable as Bitcoin. 

Instead, he suggested strategies that combine the strengths of both Bitcoin and gold.

One approach is to use Bitcoin profits to buy gold or silver, which can act as a safety net during Bitcoin’s unpredictable price swings. By moving profits into precious metals, investors can protect their gains while keeping the option to reinvest in Bitcoin later. Maharrey stressed that spreading investments across different assets is key to long-term financial security.

Gold as a Competitor to the Dollar

Maharrey highlighted gold’s unique role as a rival to fiat currencies like the U.S. dollar. Unlike Bitcoin, gold is universally recognized as money and has been a store of value for thousands of years. Central banks worldwide continue to stockpile gold, purchasing 694 tons so far in 2024—a clear sign of gold’s lasting importance.

Gold’s price stability and ease of conversion make it a reliable way to guard against inflation. Maharrey noted that the U.S. dollar’s share of global reserves has fallen by 14% since 2002, reflecting a slow shift toward other assets like gold. He linked this trend to inflation, rising national debt, and the U.S. dollar’s declining appeal due to its use in global politics.

While gold does face challenges—like being hard to use in small transactions—new solutions like gold-backed digital payment systems and fractional gold products are making it easier to use in everyday life.

Opportunities in Precious Metals

Maharrey pointed to recent price trends in gold and silver as possible buying opportunities. As of the episode, gold was trading above $2,700 per ounce, while silver had climbed past $32 per ounce. He urged listeners to consider adding precious metals to their portfolios, especially given the ongoing economic uncertainty.

He also suggested that gold and silver make great holiday gifts. Money Metals Exchange offers a wide range of products, including options for those looking to trade between cryptocurrencies and precious metals.

Sound Money Advocacy

Wrapping up the episode, Maharrey underlined the importance of sound money principles. While he acknowledged Bitcoin’s potential, he stressed the unmatched reliability of physical assets like gold and silver. These tangible resources provide stability and security, especially during times of crisis when digital systems might fail.

Originally Published on Money Metals Exchange.