Author | James Butterfill
Compiled by | Wu Says Blockchain Aki
Gold and Bitcoin are often compared as scarce, non-sovereign assets. Although there has been extensive discussion about their investment cases as stores of value, few have compared them at the production level. Both assets rely on mining — one physical, the other digital — to introduce new supply. The industrial characteristics of both are defined by cyclical economies, capital intensity, and deep ties to energy markets.
However, the mechanisms and incentives of Bitcoin mining differ subtly from those of gold mining, and these differences ultimately have significant impacts on the economic structure and strategic layout of industry participants. This report will guide you through some of their similarities, but more importantly, their substantive differences.
Asset Scarcity Stems from Physical and Computational Mining
Gold mining is a centuries-old process involving the extraction and refining of metals from underground. It requires finding suitable deposits, obtaining permits and land use rights, and using heavy machinery to extract ore, which is then separated chemically for subsequent distribution.
In contrast, Bitcoin mining involves repeatedly computing processes to solve batches of Bitcoin transactions competitively, earning newly issued Bitcoins and transaction fees. This process is known as Proof of Work, requiring procurement of rack space, electricity, and specialized hardware (ASIC) to operate efficiently, and then broadcasting the results to the Bitcoin network via an internet connection.
In both systems, mining is an inevitably high-cost process that underpins the scarcity of each asset: Bitcoin's scarcity is maintained by code and competition; gold's scarcity is determined by physical and geological location. However, the ways in which scarcity is extracted, the economic models of producers, and their evolution over time have almost no similarities.
Bitcoin Mining Economic Model: Competition, Technological Advancements, and Diverse Revenue Sources
The economic model of gold mining is relatively predictable. Companies can usually forecast reserves, ore grades, and mining schedules with reasonable accuracy, although early predictions may vary significantly: about one in five gold mining projects is profitable over their lifecycle. Major costs — labor, energy, equipment, compliance, and remediation — can be predicted with relative accuracy in advance. Depreciation is primarily driven by normal wear of equipment or depletion of reserves. The main uncertainties in the short to medium term often revolve around the stability of gold market prices, which tend to be less volatile. Additionally, nearly all these input costs can be effectively hedged.
In contrast, Bitcoin mining is more dynamic and unpredictable. Company revenues depend not only on relative fluctuations in Bitcoin market prices but also on their share of the global hash rate (i.e., global competition). If other miners aggressively expand their operations, even if your mining operation remains unchanged, your relative output may decline. This is a variable miners need to continuously consider during operations.
Thus, our first distinction is that, unlike gold mining's relatively stable production forecasts, Bitcoin miners face the challenge of production uncertainty stemming from the entry and exit of other industry participants and their strategic changes.
One of the most significant costs for Bitcoin mining companies is depreciation, especially of ASIC devices. The chips in these Bitcoin miners are rapidly improving in efficiency, forcing companies to upgrade equipment before it naturally wears out to remain competitive. This means depreciation occurs on the timeline of technological advancements rather than the physical wear of equipment. This is a major expense — albeit a non-cash expense — and starkly contrasts with gold mining, where mining equipment has a longer lifespan due to having undergone most efficiency improvements.
Bitcoin production is under constant pressure for miners to reinvest in purchasing new hardware to maintain production levels, due to changes in industry competition and the collective impact of short-term depreciation cycles — what professionals often refer to as the 'ASIC hamster wheel.'
However, a favorable fundamental distinction between Bitcoin and gold lies in their revenue structures. Gold miners profit solely by extracting and selling unreleased supplies from reserves. In contrast, Bitcoin miners profit both from extracting unreleased supplies and from transaction fees. Transaction fees provide miners with a revenue source from released supplies, which fluctuates based on demand for Bitcoin transfers. As Bitcoin approaches its supply cap of 21 million, transaction fees will become an increasingly important revenue source — a dynamic that gold miners do not experience.
Note: The bottom range of the y-axis shows 80%.
Finally, a major long-term advantage of Bitcoin mining is the ability to reuse byproducts generated during operations — heat. When electricity passes through mining machines, considerable heat is produced, which can be captured and redirected for other uses, such as industrial processes, greenhouse agriculture, or residential and district heating. This opens up entirely new revenue streams for miners. As mining machines become commoditized and depreciation cycles extend, the impact of heat reuse may further increase. Similarly, gold miners can also benefit from selling byproducts such as silver or zinc, which are typically identified during project planning and serve as elements to offset gold production costs.
Bitcoin mining has a brighter environmental future than gold mining.
It is well known that gold mining is inherently resource-extractive and leaves lasting physical footprints: such as deforestation, water pollution, waste piles, and ecosystem destruction. In many areas, it also raises concerns about land rights and worker safety.
On the other hand, Bitcoin mining does not involve physical extraction but relies entirely on electricity. This creates opportunities for integration with local infrastructure — rather than conflict. Given that miners possess liquidity and interruptibility, they can act as stabilizers for the grid and monetize energy resources that would otherwise be wasted or isolated (such as flare gas, excess hydropower, or constrained wind and solar energy).
Many do not realize that Bitcoin mining also shows potential as a clean energy subsidy and can serve as a way to demonstrate grid connectivity. By co-locating with renewable energy or nuclear power facilities, miners can enhance the economics of projects before grid connectivity — without relying on public funding subsidies.
Finally, although this point has been well documented, it is worth noting that Bitcoin's carbon emissions are generally lower and more transparent compared to traditional industries. It can be argued that Bitcoin is even necessary for a smooth transition to a renewable energy-based grid.
Since the peak of energy consumption in 2024, we have seen little increase in energy consumption, attributed to the continuous improvement in new mining hardware efficiency, with the current average power consumption only 20 watts per terahash (W/Th), a fivefold increase in efficiency compared to 2018.
Investment Characteristics of Bitcoin Mining: Rapid Cycles and Technology-Driven
Both industries are cyclical and sensitive to the prices of their production assets. However, unlike gold miners, who typically operate on multi-year schedules, Bitcoin miners can quickly scale operations up or down based on market conditions. This makes Bitcoin mining more flexible but also more volatile.
Publicly listed Bitcoin mining companies often trade like high-beta tech stocks, reflecting their sensitivity to Bitcoin prices and broader risk sentiment. In fact, some market data providers classify publicly listed Bitcoin miners as part of the tech sector rather than the traditional energy or materials sectors.
However, gold mining companies have a longer history and typically hedge future production, which can reduce sensitivity to gold price fluctuations. They are usually classified within the materials sector and evaluated like traditional commodity producers.
The way capital is formed also differs. Gold miners typically raise capital based on reserve estimates and long-term mine plans. In contrast, Bitcoin miners tend to be more opportunistic, often raising funds in recent years through direct or convertible equity issuance to support rapid hardware upgrades or data center expansions. Thus, Bitcoin miners rely more on market sentiment and cyclical timing and usually operate within shorter reinvestment cycles.
Bitcoin Mining: Energy, Computing, and Investment Opportunities in Future Financial Networks
In the long term, gold and Bitcoin may tend to play similar macroeconomic roles, but their production ecosystems are structurally different. Gold mining develops slowly, involves physical extraction, and is environmentally harmful with high resource consumption. In contrast, Bitcoin mining is faster, modular, and may increasingly integrate with modern energy systems.
For investors, this means that Bitcoin miners are an imperfect digital analogue to gold miners. Instead, they represent a new class of capital-intensive infrastructure that integrates commodity cycles, energy markets, and technological disruption investment opportunities. Investors with a long-term investment perspective should view it as a unique, brand-new asset class with distinct fundamentals, especially in the context of increasingly important transaction fees and evolving energy partnerships.
In our view, understanding these nuances is essential for making informed investment decisions in an environment increasingly moving towards distributed financial systems.
As an investment, Bitcoin miners not only provide an opportunity to invest in scarcity but also involve investment opportunities in data center infrastructure, growth in energy markets, and monetization of computational power — a fusion that traditional mining cannot achieve.
Prospects of Bitcoin Mining
Overall, we believe that most potential macroeconomic scenarios post-'Liberation Day' remain favorable for Bitcoin. The introduction of reciprocal tariffs could push the U.S. and its trading partners to inflate prices. U.S. trading partners may face rising inflation while grappling with growth headwinds. This dynamic may force them to adopt more accommodative fiscal and monetary policies — which usually lead to currency devaluation — thereby enhancing Bitcoin's appeal as a non-sovereign, anti-inflation asset.
In the U.S., the outlook is more ambiguous. Both Trump and Bessent have expressed a preference for lower long-term yields, particularly regarding 10-year Treasury bonds. While the motives behind this can be speculated — for example, to reduce debt service burdens or stimulate asset markets — this stance is generally favorable for interest rate-sensitive assets like Bitcoin. However, the current situation is quite the opposite. U.S. 10-year Treasury yields have fallen below 4% but then rebounded to 4.5%, now around 4.3%, due to skepticism about underlying trades unwinding, damage to the U.S. reputation, and the precarious status of the dollar as the global reserve currency, while Trump's uncompromising tariff policy may further drive inflation up. However, this crisis is man-made and can be quickly reversed through tariff concessions and agreements.
However, these signals may also reflect a decline in future earnings expectations for the stock market, raising concerns about an impending economic slowdown. This poses critical risks for the broader market, including Bitcoin. If investors continue to view Bitcoin as a high-beta, risk-seeking asset, such sentiment may lead Bitcoin to trade in sync with the stock market during global economic downturns, even though its narrative as a long-term store of value persists.
Nonetheless, Bitcoin has performed relatively well compared to the stock market since the 'Liberation Day'. This resilience highlights Bitcoin's unique characteristics: it is a globally tradeable, government-neutral asset with a fixed supply, accessible 24/7 year-round. As a result, market participants are increasingly recognizing Bitcoin as a reliable long-term store of value.
