Bitcoin vs. gold: Which is better for tax and investing?
Jun 30, 2025・6 min read
Since ancient times, gold has been the ultimate symbol of wealth, stability, and status. While it's unlikely this precious metal will ever lose its place as the world's premier store of value, Bitcoin (BTC) has emerged as a powerful contender. For Bitcoin believers, this digital currency is already a superior version of gold, better suited for the globalized world. Like gold, Bitcoin has a limited supply, but it’s more convenient to store, spend, and trade. So, does that mean Bitcoin is a "better" investment than gold bars?
Although Bitcoin – and cryptocurrency in general – has many advantages, it isn’t necessarily a better choice than gold for every investor. Before deciding how these assets fit into a portfolio, it’s important to compare the fundamental differences of Bitcoin versus gold.
Why is Bitcoin compared to gold?
Bitcoin's pseudonymous founder, Satoshi Nakamoto, deliberately designed aspects of BTC to mirror gold, particularly its scarce supply and the process of "mining" new coins into existence. In fact, Nakamoto explicitly states in the 2008 Bitcoin white paper that "the steady addition of…new coins is analogous to gold miners expending resources to add gold to circulation."
But these ideas didn’t originate with Bitcoin. Earlier, unsuccessful attempts to create a gold-based cryptocurrency – such as E-Gold and Bit Gold – helped lay the groundwork for Bitcoin.
Since Bitcoin’s launch in 2009, its price growth has led more investors to argue that its inherent scarcity and mining process make it a virtual equivalent of precious metals. Also, federal agencies like the Commodities Futures Trading Commission (CFTC) recognize Bitcoin as a commodity, similar to gold, rather than a security or currency. For these reasons, an increasing number of people consider Bitcoin a form of "digital gold" – a long-term store of value with inflation-resistant properties.
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Differences between gold and cryptocurrency
Although gold served as a model for many of Bitcoin's core traits, there are considerable distinctions between these assets. Beyond Bitcoin's digital nature, it also differs from gold in terms of supply, legality, and tax status.
Tangibility
The most obvious difference between Bitcoin and gold is that Bitcoin is entirely digital, while gold is a physical asset that people can weigh and inspect. Even crypto investors who store BTC in a self-custodial wallet can’t redeem a tangible Bitcoin to prove its authenticity. Instead, Bitcoin ownership is verified through the decentralized public ledger on the blockchain. This makes Bitcoin more resistant to counterfeiting than gold, but it also means traders must trust an internet-based protocol rather than physically securing valuables in a safe.
Fixed supply
Bitcoin and gold both have scarce supplies, but only Bitcoin follows a predictable inflation schedule. While gold is finite, its exact supply is unknown – there’s always the possibility that new deposits will be discovered, increasing the circulating supply.
Bitcoin, on the other hand, has a fixed cap of 21 million coins, and its inflation rate decreases predictably – cutting in half every four years until 2140. Unless Bitcoin’s code is fundamentally altered, only 21 million BTC will ever exist.
Regulation and legality
Some countries have begun adding Bitcoin to their treasuries, but gold has a much longer history as a reserve asset and is widely held by central banks. Gold’s longevity and physical traceability make it a more universally accepted asset for investment and trade in most nations.
In contrast, cryptocurrency regulations are constantly evolving and vary significantly between states and countries. While nations like the United Arab Emirates and El Salvador embrace BTC, others, like China, impose restrictions or outright bans. Gold’s well-defined legal status is a major reason for its relative stability, especially compared to the newer and more volatile Bitcoin.
Divisibility
Without physical constraints, Bitcoin can be easily divided into ultra-tiny denominations known as "satoshis." Each satoshi represents 100 millionth of one Bitcoin, making BTC more practical and accessible for daily transactions than gold coins.
Although gold can be melted and reshaped into smaller units, this process is far less efficient than dividing Bitcoin into satoshis. Even in its smallest denominations, trading an exact amount of gold for other assets is challenging compared to dividing Bitcoin into satoshis and calculating its real-time exchange rate.
Storage and security
Secure storage is a priority for both gold and Bitcoin investors, but the methods for safeguarding these assets differ significantly.
Since gold is a physical asset, investors need secure vaults, safes, or bank depositories to protect it from theft or damage. But Bitcoin requires no physical space – only a mobile phone, computer, or hardware wallet to store BTC.
Crypto traders can choose between software-based hot wallets or offline storage solutions like hardware wallets or even QR codes on paper wallets. While crypto storage eliminates the bulkiness of storing gold, it introduces new cybersecurity risks such as hacking, lost private keys, and phishing attacks.
Accessibility
Anyone with an internet connection and a smartphone, tablet, or computer can buy, sell, and transfer Bitcoin anywhere, as long as local law allows it. Bitcoin's divisibility into satoshis also makes it easy to access, as it lowers the capital requirements to start building a BTC position.
By comparison, gold isn't as accessible because of its physical nature, which creates logistical challenges (e.g., shipping and storage) and is harder to divide into smaller units. While gold has been a store of value since antiquity, Bitcoin's digital nature makes it more practical for global transactions and everyday accessibility.
Tax implications
Taxes on gold and Bitcoin vary by jurisdiction, but in most cases, they're subject to capital gains tax when an investor sells or "disposes" of an asset for a profit. However, authorities like the IRS classify physical gold as a collectible, which is taxed at a higher capital gains rate than traditional assets. Sales tax or value-added tax (VAT) may also apply when selling a physical gold investment.
Meanwhile, the IRS classifies Bitcoin and other cryptocurrencies as "property" rather than a collectible. Reporting crypto taxes can be more complex, depending on a trader’s activities – such as mining rewards or airdrops from forks. Unlike gold, using Bitcoin for purchases can also trigger taxable events. Because of this, it’s best practice to use crypto tax software like CoinTracker to monitor Bitcoin and other digital assets, which helps keep tax reporting as easy and accurate as possible.
Gold market cap versus Bitcoin market cap
Market capitalization measures the total value of an asset, which makes it a useful metric for gauging the size and influence of different investments. As of now, gold remains the largest asset globally, with a market cap of $19.3 trillion.
That said, Bitcoin’s market cap is significantly smaller at $2 trillion, but it consistently ranks among the world’s top 10 assets. In recent years, Bitcoin has even surpassed silver, the second-largest precious metal, in market capitalization.
How much gold does one Bitcoin buy?
The exchange rate between gold and Bitcoin fluctuates based on supply and demand, which is why checking the latest market prices is the best way to determine how much gold one BTC is worth. At the time of writing, gold is trading at approximately $2,800 per ounce, while one Bitcoin is valued at $96,000 – meaning one BTC is equivalent to roughly 34 ounces of gold.
How to buy gold with Bitcoin
Not all gold dealers accept Bitcoin as payment, but some, like JM Bullion, now integrate with cryptocurrencies. If a gold vendor accepts Bitcoin directly, they provide a QR code with their public Bitcoin address at checkout. All a buyer has to do is open their crypto wallet, select Bitcoin, and scan the QR code to transfer BTC to the merchant and receive gold.
But what if a gold vendor doesn’t accept BTC? There are still alternative ways to purchase gold using Bitcoin. For example, payment processors like PayPal allow investors to sell Bitcoin within their accounts and use the converted fiat balance to pay merchants. Some centralized exchanges (CEXs), like Coinbase, also offer crypto debit cards that let traders spend their cryptocurrency holdings while merchants receive the equivalent cash amount. These debit cards work anywhere Visa is accepted, making it easy to use Bitcoin for everyday purchases.
Some crypto exchanges also offer tokenized versions of gold, such as Paxos’s Pax Gold (PAXG). Unlike most cryptocurrencies, each PAXG token represents fractional ownership of physical gold stored in LBMA vaults in London. While PAXG doesn’t give investors direct possession of physical gold, it provides price exposure to the metal while offering the transparency and flexibility of blockchain technology.
Report your digital gold with a CoinTracker account
Some investors hesitate to buy cryptocurrency like Bitcoin because they’re unsure how to report their holdings and pay the required taxes. While reporting crypto differs from stocks and ETFs, CoinTracker simplifies the process and eliminates the stress of tax compliance.
With CoinTracker's user-friendly Portfolio Tracker, investors can connect their exchange accounts and wallet addresses to generate a complete transaction history for IRS reporting. CoinTracker also automates the preparation of essential tax forms, including Schedule D and Form 8949, ensuring everything is accurate and ready for tax day.
See why millions of crypto investors use CoinTracker every year to report their taxes by getting started with a free account today.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.