Will gold rise again? Should we give up Bitcoin to embrace gold?

Author: Hua Li Hua Wai

A few days ago, a friend left a message in the background asking: Since the crypto market is already in a bear market, should we give up Bitcoin to embrace gold?

This sounds like a rather interesting question.

As for whether we are in a bear market or a bull market, we have already discussed this issue in several articles a few days ago, so I won't elaborate on it here. Today, we mainly continue to briefly talk about gold and Bitcoin.

Recently, many people have been attracted by the rise of gold, while stocks and cryptocurrencies seem less appealing. From the beginning of the year to now (YTD), the return on gold has reached 26.75%, while the S&P 500 has a return of -10.2% and Bitcoin -9.3%. As shown in the figure below.

If we make a simple comparison of the historical trends of gold and the S&P 500, we can find that since 2020, the performance of the U.S. stock market and gold has already begun to show significant differences. As shown in the figure below (the blue line is gold, and the red line is the S&P 500).

In February 2020, the U.S. stock market began to plummet rapidly, while gold started to rise quickly. A similar situation seems to have occurred again in February 2025. Of course, the factors leading to the sharp decline in the U.S. stock market and the sharp rise in gold are different in different periods. For example, the last time it was mainly due to the impact of the global pandemic, while this year it is mainly due to issues like U.S. tariffs (you can refer to our article published on April 14).

In fact, the basic logic of gold's rise seems quite simple: as long as the world is not peaceful, both the U.S. stock market and cryptocurrencies will plummet, while the price of gold will soar.

1. Should we give up Bitcoin to embrace gold?

According to data from The Kobeissi Letter, net inflows into gold funds have reached a record $80 billion this year, which is twice as high as the previous peak for the entire year of 2020. Investors are injecting funds into the gold market at a record pace for hedging (some of which may also be for short-term speculation). As shown in the figure below.

In the coming period, if we are still in a continuous and uncertain environment, then in the medium to long term, the price of gold is likely to continue to rise, especially when the dollar may face some crises, this bullish sentiment will be even stronger.

So, should we give up Bitcoin to embrace gold now? This question still depends on your position ratio and risk preference!

Here, the position ratio refers to the allocation of your assets:

For example, if you have 10 million RMB, how would you plan this portion of your assets? For instance, what proportion would you use to buy fixed assets (such as houses), how much would you invest in traditional financial products (such as deposits, wealth management, funds), how much would you invest in the stock market (such as A-shares, Hong Kong stocks, U.S. stocks), how much would you invest in precious metals (such as gold), and how much would you invest in cryptocurrencies (such as BTC)……

Here, the risk preference refers to your specific investment strategy:

If you invest 1 million RMB (which is 10% of your total assets) in cryptocurrencies, the first thing you need to understand is that cryptocurrencies are both a field full of high returns and a field with extremely high risks. You must be mentally prepared to possibly lose this 10% of your assets at any time.

Next, you need to customize your investment strategy, meaning you need to consider long-term, medium-term, and short-term investment cycles, while also choosing specific fields or targets based on your personal time and energy. For example, you can further divide the 1 million RMB into 9:1 or 5:3:2 or 6:2:1:1, etc. Taking 5:3:2 as an example, you can allocate 50% of your position for low-risk preference to long-term invest in Bitcoin (mainly long-term investment), 30% for on-chain financial management (mainly flexibility), and 20% for high-risk speculative projects (mainly short-term speculation).

In short, before deciding to invest, you first need to think clearly (plan well):

• Your asset allocation method

• Your specific allocation model or strategy under different allocations

Then, you can execute specific investment choices (gold, Bitcoin, etc.) and investment plans:

• Establish and form your own trading system or trading logic based on different strategies

• As time moves on, maximize the overall asset scale for the best possible returns based on your trading system/logic

So, returning to the question of whether to give up Bitcoin to embrace gold now: If you didn't know what to do before, then I believe you should have some of your own ideas now. And if after reading the above thoughts, you still don't know what to do, our suggestion is to keep your money safely in the bank and not to engage in any risky investments (including gold, stocks, cryptocurrencies).

Especially now, gold is already at a relatively high position in the short term, and ordinary people should not speculate on chasing highs unless they know what they are doing. If you are a medium to long-term investor, for example, with a goal of trends over the next few years, then you can consider gradually building positions when gold undergoes a phase correction.

2. Gold and Bitcoin

I remember in an article from last year (August 3, 2024), we specifically organized some thoughts on the topic of gold and Bitcoin. As shown in the figure below.

Continuing from the above topic, in the medium to long term, gold remains the best asset to combat inflation (although gold also has about 3-5% inflation each year) and to cope with the global uncertain environment. If your investment cycle is 5 years, 10 years, 15 years, or 20 years, you can buy and hold gold at any time without too much consideration, just allocate a certain proportion of funds to persistently invest in gold.

If you are seeing that gold's recent rise is not enough and want to engage in short-term speculation, then you need to manage your position allocation and risk management, and you also need to choose your targets wisely, such as whether you want to buy physical gold, gold ETFs, or gold stocks (such as FSM, PPTA, DRD, etc.), and so on……

As for Bitcoin, although many people compare it to "digital gold," at this stage, Bitcoin does not yet possess the attributes of gold (nor can it directly replace gold unless major countries globally can eventually establish reserves for Bitcoin, complete the distribution of interests, and form corresponding mechanisms in terms of crypto policies). However, if you still have confidence in the long-term prospects of the crypto field, then Bitcoin remains a top choice.

1) From the perspective of decentralization

Both gold and Bitcoin seem to belong to decentralized assets. For example: the main holders of gold are central banks and investment institutions of various countries, but it is also a universal asset, as much gold is held privately. For instance, India's private gold holdings are estimated to be around 25,000 tons, China's about 16,000 tons, and the U.S. about 8,000 tons.

The main holders of Bitcoin are countries, whales, and investment institutions (with strategic reserve plans in countries like the U.S., Bitcoin may increasingly concentrate in the hands of nations and investment institutions), but currently, many retail investors also hold Bitcoin, as shown in the figure below.

2) From the perspective of mining costs

Gold and Bitcoin differ in this regard. For example: the current mining cost of gold is about $1,000-$1,400 per ounce (the cost varies by country), while the mining cost of Bitcoin is about $40,000-$60,000 (depending on different mining machines), as shown in the figure below.

However, gold has a certain inflation rate, while Bitcoin has a fixed supply of 21 million coins.

3) From the perspective of consensus

Both gold and Bitcoin are viewed as Store of Value assets, but their sources of consensus, nature of consensus, and stability differ.

For instance, in terms of source of consensus, gold has a stronger global consensus, as it has undergone thousands of years of human usage history, while Bitcoin has only been around for a little over a decade.

It can be said that gold is more of a "historical" consensus sediment of humanity, while Bitcoin is a "future" consensus attempt.

Of course, besides comparing from the perspectives of decentralization, mining costs, and consensus, there are many other ways to find similarities or differences between gold and Bitcoin.

Since gold represents a historical consensus sediment and Bitcoin represents a future consensus attempt, therefore, giving up Bitcoin to embrace gold, or giving up gold to embrace Bitcoin, both seem to be rather extreme choices.

In conclusion, we can choose to buy only gold for a period, or only Bitcoin for a period, or we can buy both gold and Bitcoin simultaneously for long-term reserves. This is determined by your personal preferences, position allocation, and risk management. Short-term investment relies on technology (ability to grasp indicators, filter information, analyze data, etc.), while long-term investment relies on mindset (investment logic, grasp of cyclical trends, values, etc.). If your focus is only on the present but you lack good technical support for trading, such as seeing a target rise or become popular, and then directly abandoning your current target to chase highs or trends, this repeated investment mindset may ultimately lead to getting nothing.