Better Asset to Buy Now With $500 and Hold for 3 Years: Bitcoin vs. Gold

The SPDR Gold Shares (NYSEMKT: GLD) exchange-traded fund (ETF) is up by 60% in the last 12 months, putting most other major assets to shame. Meanwhile, Bitcoin (CRYPTO: BTC), the asset that some call "digital gold," is down by 12% in the same period, causing many investors to question whether the coin actually deserves the moniker.

But what are these assets going to do over the next three years? And which is worth buying with $500 right now? Let's unpack the investment thesis for each and figure it out.

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Gold's case is the strongest it's been in a generation

The appeal of gold, whether held via a gold ETF or any other way, is that it'll retain its value during those interesting and often quite turbulent times because it's widely accepted as a scarce store of monetary value.

Recently, central banks have been buying gold at a record pace, with ongoing purchases running far above the average between 2015-2019. Widespread concerns about fiscal deficits in the U.S., the dollar's weakness, and geopolitical instability that might further threaten the petrodollar have all pushed sovereign institutions toward acquiring a metal that simply doesn't carry counterparty risk.

What's more, gold's price isn't usually volatile at all, even if its price has gone on an upward tear over the last couple of years. In fact, in the bear market of 2022, when nearly every asset fell hard, gold held steady. Thus, gold's investment thesis is fairly evergreen, and most portfolios could stand to hold some.

Bitcoin's upsides have downsides, too

Much like with gold, most portfolios could stand to allocate $500 to Bitcoin.

But while its investment thesis also centers around its status as a scarce store of value, it doesn't have the same history of use as gold does, which means that it has a bit more upside from investors and financial institutions adopting it. On that front, spot Bitcoin ETFs have seen cumulative net inflows exceeding $57 billion since their launch in 2024, which means that the adoption process is ongoing in full swing.

Scarcity will also force prices higher over time alongside adoption. Every four years, the reward for mining Bitcoin is cut in half in an event called the halving, which will next occur in 2028. At the moment, the amount of Bitcoin that has been dormant and unmoved for 10 years or more now exceeds the daily new mining output, which effectively compresses the available supply further.

So it won't take too much in the way of demand to keep upward pressure on the asset's price. Nonetheless, the main problem with Bitcoin relative to gold isn't the mechanics of Bitcoin itself, it's that it can fall 40% or more in a quarter.

Therefore, if you already hold gold or have zero crypto exposure, Bitcoin is the stronger pick with $500 here. But if you're worried about holding an asset that might not be worth as much as you invested from one day to the next, gold's stability and structural demand make it the winner.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.