Gold vs. Bitcoin: Post-US Election and into 2025
Introduction
In the wake of the recent US election, a new economic and geopolitical landscape is emerging. As the world is dealing with ongoing geopolitical tensions, including the Russia-Ukraine conflict and Middle East instability, investors are seeking refuge in traditional and digital safe-haven assets.
In this volatile climate, Gold and Bitcoin have emerged as two prominent contenders. Both assets have historically served as hedges against inflation, economic turmoil, and geopolitical risks. However, their distinct characteristics and market dynamics make them attractive to different types of investors.
As we look ahead to 2025, let’s evaluate the potential of these two assets as investments and trading instruments and the opportunity they present for traders.
The macro backdrop post-US election
The global economic landscape in late 2024 is marked by serious concerns. The US national debt has topped $36 trillion, raising questions about the dollar's purchasing power and the long-term sustainability of US fiscal policy.
Inflationary pressures, combined with a 30%-40% increase in prices since 2020, continue to reduce wealth. Meanwhile, a record $7 trillion in money market funds indicates a large pool of cash that could flow into higher-risk assets.
The recent US election has had a mixed impact on financial markets. After reaching all-time highs, Gold prices experienced a brief pullback but have since stabilised. Crude oil prices have remained volatile, fluctuating around recent levels. The S&P 500 has seen a modest rally, suggesting investors are optimistic about the new administration's policies. The cryptocurrency market, particularly Bitcoin, has surged dramatically, gaining over 30%.
The new administration’s key policy initiatives include reducing corporate tax rates to stimulate business investment and job creation, funding large-scale infrastructure projects, streamlining regulations to promote business innovation, scaling back federal programs and reducing government wasteful spending and debt.
The Federal Reserve, under the leadership of Jerome Powell, is expected to maintain a cautious approach to monetary policy, balancing economic growth with inflation concerns.
Geopolitical tensions and safe-haven assets
Geopolitical tensions have significantly amplified the appeal of safe-haven assets like Gold and Bitcoin —investors and governments alike are turning to these assets as a hedge against risk.
Gold's renewed interest
Gold, a traditional safe-haven asset, has seen renewed interest due to geopolitical risks. There is a growing trend for central banks around the world to diversify their reserves away from the US dollar, perceiving it as a less reliable store of value. This has boosted demand for Gold, particularly as a hedge against inflation and currency devaluation. Additionally, geopolitical events, such as the Russian invasion of Ukraine, and actions such as the freezing of Russian assets, have further solidified Gold's position as a reliable safe-haven asset.
Bitcoin's rise
Bitcoin, a relatively new asset class, has also emerged as a safe-haven asset. Its decentralised nature, limited supply, and increasing global adoption have made it an attractive investment for those seeking to protect their wealth. As geopolitical tensions rise and traditional financial systems face uncertainty, Bitcoin's appeal as a digital store of value has grown.
The impact of a weakening dollar
A weakening US dollar, often associated with geopolitical instability and economic uncertainty, can further boost the demand for Gold and Bitcoin. As the dollar loses value, investors seek alternative assets to preserve their wealth. Gold, priced in US dollars, becomes more affordable for international buyers, driving up demand. Similarly, Bitcoin, as a global digital asset, benefits from a weaker dollar, as it offers an alternative to traditional fiat currencies.
Central bank demand for safe-haven assets
Central banks, particularly those in emerging economies, are increasingly turning to Gold and Bitcoin as part of their reserve strategies to mitigate risks and protect their economies from external shocks.
The role of BRICS nations
BRICS nations, including Brazil, Russia, India, China, and South Africa, are increasingly seeking to reduce their reliance on the US dollar. These countries are exploring alternative payment systems and reserve currencies, including Gold and Bitcoin.
Gold – the timeless safe haven
Gold has long been revered as a reliable hedge against inflation and currency devaluation. Its intrinsic value and limited supply make it a desirable asset during periods of economic uncertainty and market volatility.
Historically, Gold has exhibited strong performance during periods of negative real interest rates, when inflation outpaces interest rates. The 1970s and the bull market that began around 2000 are notable examples of this trend. Gold's resilience during economic crises, such as the 2008 financial crisis and the COVID-19 pandemic, further emphasised its strategic importance in investment portfolios.
The diversification of central banks worldwide away from the US dollar, to avoid the risks associated with a single-currency reserve, has increased demand for Gold, which offers a politically neutral and inflation-proof safe haven.
Looking ahead to 2025, analysts project prices could exceed $3,000/oz, driven by rising inflation, fiscal deficits, and geopolitical instability. Current consolidation around $2,600/oz is considered a potential buying opportunity.
Bitcoin – the game changer
Bitcoin demonstrated a meteoric rise post-election, surging by 30% in under a week. Its returns during its brief existence since 2009 position it as one of its best-performing assets in history.
Bitcoin as digital Gold
Bitcoin and Gold share key characteristics, including scarcity and decentralization. Gold’s finite supply is determined by nature, while Bitcoin is digitally capped at 21 million coins, creating long-term value. Both assets operate outside direct government control—Gold as a tangible, politically neutral asset, and Bitcoin through its decentralised blockchain network.
However, Bitcoin differs in its digital nature, portability, and higher volatility, making it a speculative, high-growth asset compared to Gold’s stability. With sustainable mining practices like El Salvador’s volcanic energy and Bhutan’s hydroelectric power, Bitcoin’s environmental footprint is also becoming more efficient. Gulf nations like Dubai and Qatar are rumoured to be quietly accumulating Bitcoin, reflecting its rising appeal globally.
Bitcoin’s 2025 outlook
Bitcoin’s outlook for 2025 remains highly optimistic:
Regulatory clarity
The resignation of SEC Chair Gary Gensler, known for being a regulatory nemesis to the crypto community, and the appointment of pro-crypto figures like Howard Lutnick as the new Secretary of Commerce and Scott Besent as the new U.S. Treasury Secretary are significant steps towards a more favourable regulatory environment for cryptocurrencies in the United States.
A pro-crypto Congress is expected to attract more institutional participation, stabilising Bitcoin’s price over time.
Strategic Bitcoin reserves
The U.S. is pushing its Bitcoin policy with President-elect Donald Trump promising to form a "Strategic Bitcoin Reserve." Senator Cynthia Lummis' proposed Bitcoin Act supports this plan, aiming to acquire an additional 1 million Bitcoins over five years by reallocating existing financial resources instead of incurring new debt, potentially funded by the sale of reserves. State-level interest is also growing, with Pennsylvania leading efforts to allocate 10% of its treasury to Bitcoin and similar initiatives gaining traction in other states.
Globally, Bitcoin adoption is accelerating among nations. El Salvador and Bhutan were early movers, with El Salvador using volcanic energy to mine Bitcoin and Bhutan leveraging hydroelectric power. More recently, the UAE, Ethiopia, and Argentina have initiated state-backed mining operations, while Russia has taken steps to regulate cryptocurrency mining, hinting at state-level Bitcoin accumulation.
This global race aligns with Bitcoin’s game theory, where early adopters gain a strategic advantage. Among the likely candidates front-running the U.S. are Saudi Arabia, the UAE, Qatar, and Argentina, all of which have the financial resources and growing interest in Bitcoin as a reserve asset.
Gold vs. Bitcoin
For perspective, here is the market cap of the world’s top assets at the end of 2024. Gold, in the first position, has almost 10 times the market capitalisation of Bitcoin.
Past performance is not an indicator of future results
The following chart compares the price performance of Bitcoin (BTC) and Gold (in USD) in the last 5 years:
- Bitcoin (BTCUSD): Demonstrates an explosive growth of +870.70%, with significant volatility and steep upward movements, particularly in recent months.
- Gold (CFDs on US$/OZ): Shows steady growth of +99.41%, with much less volatility compared to Bitcoin, reflecting its traditional safe-haven status.
Past performance is not an indicator of future results
Gold is a traditional store of value, highly liquid and easily accessible. Its physical nature, however, necessitates secure storage, incurring costs for vaulting and insurance. Gold's value is relatively stable and less volatile compared to Bitcoin.
Bitcoin, on the other hand, is a digital asset that offers unmatched portability and global accessibility. Its decentralised nature eliminates the need for physical storage and provides a high degree of security. However, Bitcoin's price volatility is significantly higher than Gold’s, presenting both opportunities for substantial returns and heightened risk.
Regarding regulatory risks, Gold is subject to minimal regulatory oversight due to its long-standing history and physical nature. Bitcoin, as a relatively new asset class, faces greater regulatory uncertainty, particularly in terms of taxation and legal recognition. Together, Gold and Bitcoin serve as complementary hedges against inflation and economic instability.
Conclusion
In 2025, a diversified portfolio that includes both Gold and Bitcoin offers a compelling investment strategy.
Gold provides stability and protection against inflation. Its intrinsic value and limited supply make it a reliable hedge against economic downturns and currency devaluation.
Bitcoin, on the other hand, represents a high-growth, high-risk investment opportunity. Its decentralised nature, limited supply, and increasing global adoption have positioned it as a potential hedge against traditional financial systems.
By combining these two assets, investors can create a portfolio that balances risk and reward. Gold offers a more conservative approach, while Bitcoin provides exposure to the potential upside of the cryptocurrency market. Ultimately, the optimal allocation to each asset will depend on individual risk tolerance and investment objectives.
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This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice. Data is sourced from third party providers.
