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Why gold is a very different investment than cryptocurrencies

August 2022

Gold and Cryptocurrencies are often compared. But gold – something you can hold – is very different from non-tangible, digital cryptocurrencies.

  • Demand for gold is more diverse
  • The supply of gold is also more diverse
  • Cryptocurrencies have so far behaved like speculative investments
  • Gold has repeatedly proven itself as a safe-haven investment, including during times of high inflation

In short, cryptos are no substitute for gold.


Demand for gold comes from many places

Gold is different from almost every other asset because it is used in so many ways. Investors and central banks own gold to generate returns and protect their wealth. Jewelry is a major part of gold demand. Gold is also a key component of electronic devices, from cell phones to TV sets. (Figure 1).

As gold has multiple uses, its price can be more resilient than prices of many other assets. When financial markets are under stress, investors buy gold as a haven. When economies are doing well, consumers buy more gold jewelry and electronics.

Figure 1:

Cryptocurrency demand is less varied

For our discussion, we refer to bitcoin statistics when we talk about cryptos, since it has the largest market capitalization of all cryptocurrencies.

The demand for crypto currencies is largely limited to investment, as compared to gold, which is bought for many reasons.

Some consumer research shows that investors are more likely to view cryptos as a high risk, high return, speculative bet compared with gold[1]. (Table 1) Cryptos can experience big price swings. Bitcoin, for example, has soared and tumbled in value over the past year, as speculators have piled in or sold out.

Table 1:

Gold production and ownership are diverse

Gold is mined across the world and no continent accounts for more than 30% of global production[2].

Ownership of gold is diverse. The US Treasury is the largest known holder of gold, but it owns just 4% of all the gold above ground. Almost 50% of this stock of gold is in jewellery owned around the world, while and more than 20% is owned by investors as gold bars and gold coins[3].

Cryptocurrency computing power and ownership is less widespread

In 2021, entities in five countries controlled, on average, 80% of computing power on the Bitcoin network[4]. Bitcoin ownership is also highly concentrated – just 2% of Bitcoin holders own 95% of all available Bitcoins[5].

Gold and Bitcoin behave differently as investments

Gold tends to come into its own when equity markets are under stress. Bitcoin, however, does not follow this pattern. From November 2021 to May of 2022, for example, Bitcoin more than halved in value, as the S&P 500 index and the Nasdaq both fell back. Gold, by contrast, held steady[6].

As cryptocurrencies are much more volatile than gold, our analysis suggests that investors who own cryptos would benefit from adding gold to their portfolios, to reduce overall risks and increase long-term underlying returns.

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Key takeaways

  • The crypto market is still in development. It is highly volatile, and cryptocurrencies can be hard to buy and sell.
  • Gold is a tried and tested investment asset.
  • Gold has delivered returns rivaling the stock market over the past 20 years and more.
  • Gold performs well during periods of inflation.
  • Gold is easy to buy and sell, even during periods of extreme stress.
  • Investments in gold help diversify portfolios, by outperforming other assets during economic and financial downturns.

About the World Gold Council

The World Gold Council is the market development organization for the gold industry. Our purpose is to stimulate and sustain demand for gold, provide industry leadership, and be the global authority on the gold market.

We develop gold-backed solutions, services and products, based on authoritative market insight, and we work with a range of partners to put our ideas into action. As a result, we create structural shifts in demand for gold across key market sectors. We provide insights into the international gold markets, helping people to understand the wealth preservation qualities of gold and its role in meeting the social and environmental needs of society.

Based in the UK, with operations in India, China, Singapore and the USA, the World Gold Council is an association whose members comprise the world’s leading gold mining companies.

For more information

Please contact: researchgold@gold.org

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  1. Results of an online quantitative survey of 10,000 retail investors across five markets (Germany, US, Canada, India and China) run by Hall & Partners in October 2021
  2. As of December 2021. For a detailed breakdown of mine production by region and country, see Chart 12b in The relevance of gold as a strategic asset (US edition) as well as the mine production by country section in Goldhub.com.
  3. See central bank statistics and above-ground gold stocks in Goldhub.com.
  4. Statista, https://www.statista.com/statistics/1200477/bitcoin-mining-by-country/
  5. Top 100 Richest Bitcoin Addresses and Bitcoin distribution (bitinfocharts.com)
  6. From November 1, 2021 to May 31, 2022, gold prices gained 1.9%, rising from $1,804.40 to $1,838.70 as measured by the LBMA PM Price

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