As we near the year’s end, institutional investors continue to pour money into Bitcoin, driving its ratio versus gold to historic highs. Bitcoin’s recent breakout has just pushed this ratio even higher. The ratio, which indicates the amount of gold that one Bitcoin can purchase, hit new heights on Monday, increasing to 37.3. One Bitcoin can now buy almost 37 ounces of gold, a record high.
“Reaching a new peak indicates the ongoing acceptance and development of Bitcoin as an asset class,” Maple Finance’s CEO and co-founder Sidney Powell told Decrypt. We anticipate a catch-up in the ratio due to the steady increase in ETF inflows and the growing recognition of bitcoin as a crucial component of balanced portfolios.
Bitcoin’s Rise as Digital Gold
The historical print of the reading, which is determined by dividing the price of Bitcoin by the spot price of gold per ounce, highlights the growing dominance of Bitcoin Reaches Record as “digital gold,” driven by institutional adoption this year and the attractiveness of its scarcity model.
Most of the time, investors use it to compare the strengths of the two assets and determine which one they prefer. At 36.7, it is presently around half a point higher than when crypto peaked in November 2021. Digital asset trading firm QCP Capital of Singapore stated in a report on Monday that the ratio further solidifies Bitcoin’s position as digital gold, making it an “increasingly favored store of value over traditional gold.”
Bitcoin vs. Gold: Scarcity and Volatility
Despite the increased correlation between Bitcoin and traditional markets—partly because of the January licensing of U.S. Bitcoin exchange-traded funds—traders still prefer gold when crypto is volatile. The total value of Bitcoin ETF assets under management has hit $119 billion.
Compared to the $290 billion held by gold-backed ETFs as of November 2024, this amount is less than half, as the World Gold Council reported. The code for Bitcoin Reaches Record sets a maximum production limit of 21 million tokens and incorporates halving events that periodically cut the supply by 50%. Therefore, we won’t produce the last Bitcoin until approximately 2140.
There is a standard comparison between gold and this asset because of its limited supply qualities, but its intended scarcity starkly contrasts with gold’s continual mining production. Bitcoin offers more return potential despite more substantial price swings (near 50%), in contrast to gold’s lower volatility (about 20% annually) and advantages from its 3,500-year history as a traded asset.
Summary
The ratio of one Bitcoin to approximately 37 ounces of gold has reached historic highs, thanks to institutional investment in Bitcoin. This surge results from an increasing number of people viewing Bitcoin as “digital gold,” a concept bolstered by its scarcity and the money flowing into exchange-traded funds.
Bitcoin ETF assets ($119 billion) are still significantly lower than gold-backed ETFs ($290 billion), even if Bitcoin’s volatility offers greater return possibilities amid market instability. Bitcoin Reaches Record and gold have a comparable scarcity; however, Bitcoin’s supply is set, whereas gold’s is constantly being produced.
FAQs
Why is Bitcoin referred to as "digital gold"?
Bitcoin is considered "digital gold" due to its limited supply and scarcity model, similar to gold's finite availability.
How has institutional investment impacted Bitcoin?
Institutional investment has driven Bitcoin's price and increased its ratio against gold, marking its growing acceptance as a mainstream asset.
How does Bitcoin's volatility compare to gold?
Bitcoin has higher volatility (around 50%), offering greater return potential, while gold's volatility is much lower (about 20%).
How does Bitcoin's supply differ from gold's?
Bitcoin has a fixed supply of 21 million tokens, while gold continues to be mined, making Bitcoin's scarcity more defined.
