As of Nov 20, 2023, the conversion rate of 1 btc to usd stood at $37,200 (CoinMarketCap #CMC257), that of gold one ounce was at $1,980 (LBMA fixed price), and one BTC was valued equal to 18.8 ounces of gold. But value comparison requires multi-dimensionality measurement: The aggregated market cap of Bitcoin is 730 billion US dollars (19.5 million coins circulating), which is only 6.1% of the 12 trillion US dollars world gold market capitalization (World Gold Council statistics). In volatility, Bitcoin’s 30-day annualized volatility is 68% (13% for gold). When the COVID-19 outbreak occurred in March 2020, Bitcoin fell by 53% within a day (4.3% for gold), but in 2021, the year-to-year rise of Bitcoin was 59.8% (3.6% for gold).
In terms of liquidity, gold’s average daily spot volume is 143 billion US dollars (London Bullion Market Association data), and that for Bitcoin’s average daily spot and derivatives volume is 32 billion US dollars (CoinGecko #CG2023Q3). But the market depth for Bitcoin (0.5% price range order volume) is 12,000 BTC (approximately 446 million US dollars). It is merely 5.2% of similar ratio gold order volume. For comparison of the safe-haven nature, while there was the Israeli-Palestinian war during October 2023, gold rose 8.7% and Bitcoin rose by 12.3%. However, with the beginning week of the Russia-Ukraine conflict in 2022, gold rose 4.1% while Bitcoin lost 8.9%, a reflection on how risk hedging performed volatile-wise.
For production cost, the total computational power of Bitcoin network is 520 EH/s, the energy cost to mine a single coin is roughly $18,500 (CCAF data, University of Cambridge), and the average cash cost to mine an ounce of gold is $1,050 per ounce (S&P Global Report). However, the absence of 54,000 tons of proven gold reserves (with an annual production of 3,500 tons) is based on physical objects, while the theoretical cap of 21 million bitcoins is algorithmically determined. There are significant differences in institutional holding: Global central banks hold 35,600 tons of gold (17%), while institutions such as MicroStrategy hold 857,000 Bitcoins (4.4%). But the BlackRock Gold ETF (IAU) is sized at 29 billion US dollars, and approval of the Bitcoin ETF is yet pending.
In regulatory acceptance terms, gold is a reserve asset in 187 countries (IMF statistics), while Bitcoin has thus far gotten just legal tender status in El Salvador (enactment of the law passed in 2021). In the context of payments, the Visa network processes $1.2 trillion (jewelry + investment) worth of gold transactions annually, and the capacity of the Bitcoin Lightning Network is 5,800 BTC (approximately 215 million US dollars), and it processes at a rate of 1 million transactions per second (Visa’s is 65,000 transactions per second). For environmental expenses, Bitcoin consumes 110 TWh of electricity annually (Cambridge Bitcoin Electricity Consumption Index), equivalent to the Netherlands’ whole electricity consumption. The carbon footprint of gold mining is 34 million tons annually (World Gold Council), but gold can be recycled (having a global stock of 205,000 tons and an annual recycling volume of 1,200 tons).
Value storage attribute comparison demonstrates that Bitcoin has a 43.2% (2.1% gold) 10-year annualized return rate but the peak drawdown is -83.3% (-45.8% gold). During the Federal Reserve interest rate hiking time in 2023, the correlation coefficient of Bitcoin and the S&P 500 is 0.72 (gold -0.15), which indicates that it is more inclined towards risky assets. The physical cost of storage is disparate: Maintaining $100 million in bullion involves a annual premium of $400,000 (Brink’s normal fee), while maintaining a cold Bitcoin wallet incurs zero expense.