Gold and Bitcoin are often compared as scarce non-sovereign assets. While there has been extensive discussion about their investment case as stores of value, few have made comparisons at the production level. Both assets rely on mining—one physical and the other digital—to introduce new supplies. The industry characteristics of both are defined by cyclical economies, capital intensity, and deep connections to energy markets.
However, the mechanisms and incentives of Bitcoin mining differ from those of gold mining in subtle ways, and these differences ultimately have significant implications for the economic structures and strategic layouts of industry participants. This report will guide you through some of their similarities, but more valuably, their substantive differences.
Asset scarcity arises from physical and computational mining.
Gold mining is a centuries-old craft involving the extraction and refining of metals from underground, requiring the search for suitable ore deposits, obtaining permits and land use rights, and using heavy machinery to extract ore from the ground, followed by chemical processing to separate the metals for subsequent distribution.
In contrast, Bitcoin mining requires the repetitive computational process to solve batches of Bitcoin transactions competitively to earn newly issued Bitcoin and transaction fees. This process is known as Proof of Work, requiring the procurement of rack space, electricity, and dedicated hardware (ASIC) to efficiently run computations, which are then broadcasted to the Bitcoin network via 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 methods of extracting scarcity, the economic models of producers, and their evolution over time have almost no similarities.
Bitcoin mining economic model: competition, technological advancement, and diversified income sources.
The economic model of gold mining is relatively predictable. Companies can typically forecast reserves, ore grades, and extraction timelines with reasonable accuracy, although initial forecasts may vary widely: about one-fifth of gold mining projects achieve profitability over their lifetimes. Major costs—labor, energy, equipment, compliance, and reclamation—can be reasonably predicted in advance. Depreciation mainly occurs due to normal wear and tear of equipment or depletion of reserves. The primary uncertainty in the short to medium term often relates to the stability of gold market prices, which exhibit less volatility. Furthermore, nearly all of 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 market share in the global hash rate (i.e., global competition). If other miners aggressively expand their operational capabilities, even if your mining operations remain constant, your relative output may decline. This is a variable that miners must continuously consider in their operations.
Thus, our first distinction is that, unlike the relatively stable production forecasts of gold mining, Bitcoin miners face challenges of production uncertainty, which arise from the entry and exit of other industry participants and their strategic changes.
Source: (Deep Tide TechFlow)
One of the most important costs for Bitcoin mining companies is depreciation, especially of ASIC equipment. The efficiency of the chips in these Bitcoin miners is rapidly improving, forcing companies to upgrade their equipment before natural wear and tear occurs to remain competitive. This means that depreciation occurs on the timeline of technological advancement rather than the physical wear of the equipment. This is a major expense—albeit a non-cash expense—and stands in stark contrast to gold mining, where mining equipment has a longer lifespan because these machines have already undergone most efficiency improvements.
Bitcoin production faces constant pressure due to changes in industry competition and the combined impact of short-term depreciation cycles, requiring miners to reinvest in new hardware to maintain production levels—what professionals often refer to as the ‘ASIC hamster wheel.’
Source: (Deep Tide TechFlow)
However, Bitcoin also has a favorable fundamental distinction compared to gold in terms of revenue structure. Gold miners profit solely from extracting and selling unreleased supplies in 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 21,000,000, transaction fees will become an increasingly important source of revenue—a dynamic that gold miners do not experience.
Source: (Deep Tide TechFlow) The y-axis shows the bottom range at 80%
Finally, a major long-term advantage of Bitcoin mining is the ability to repurpose byproducts of operations—heat energy. When electricity passes through mining machines, it generates a significant amount of heat, 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 equipment commoditizes and depreciation cycles extend, the impact of heat reuse may grow further. Similarly, gold miners can also profit by selling byproducts like silver or zinc, which are typically identified in project planning and serve as elements to offset gold production costs.
Bitcoin mining has a brighter environmental future compared to gold mining.
It is well known that gold mining is inherently resource extraction-based and leaves a lasting physical footprint: such as deforestation, water pollution, waste pools, and destruction of ecosystems. 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 provides opportunities for integration with local infrastructure—rather than conflict. Due to the liquidity and interruptibility of miners, they can act as stabilizers for the grid and monetize energy resources that would otherwise be wasted or stranded (such as flared gas, excess hydroelectric power, or constrained wind and solar energy).
Source: (Deep Tide TechFlow)
Many have not realized that Bitcoin mining also shows potential as a clean energy subsidy and can serve as a means of proving grid connection. By co-locating with renewable energy or nuclear power facilities, miners can improve the economics of projects before grid connection—without relying on public funding subsidies.
Finally, while this has been well documented, it is worth noting that Bitcoin's carbon emissions are generally lower and more transparent compared to traditional industries. One could argue that Bitcoin is even necessary in the smooth transition to a renewable energy-based grid.
Source: (Deep Tide TechFlow)
Since the peak of energy consumption in 2024, we have seen almost no increase in energy consumption, attributed to the continuous improvement in the efficiency of new mining hardware, with the current average power consumption at only 20 watts per terahash (W/Th), a five-fold increase in efficiency compared to 2018.
Source: (Deep Tide TechFlow)
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 timelines, Bitcoin miners can scale operations up or down more quickly based on market conditions. This makes Bitcoin mining more flexible but also more volatile.
Publicly listed Bitcoin mining companies tend to 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 industry rather than traditional energy or materials sectors.
However, gold mining companies have a longer history and often hedge future production, reducing their sensitivity to fluctuations in gold prices. They are typically classified as part of the materials sector and evaluated like traditional commodity producers.
The methods of capital formation also differ. 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 through direct or convertible equity issuance in recent years to support rapid hardware upgrades or data center expansions. Therefore, Bitcoin miners are more reliant on market sentiment and timing cycles, and they typically operate within shorter reinvestment cycles.
Bitcoin Mining: Investment Opportunities in Energy, Computing, and Future Financial Networks
Gold and Bitcoin may trend towards playing similar macroeconomic roles in the long run, but their production ecosystems are structurally different. Gold mining develops slowly, is physically extracted, environmentally harmful, and resource-intensive. Bitcoin mining, on the other hand, is faster, modular, and may increasingly integrate with modern energy systems.
For investors, this means that Bitcoin miners are an imperfect digital analog of 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 horizon should view them as a unique, emerging 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 increasingly decentralized financial system.
As an investment, Bitcoin miners not only provide investment opportunities in scarcity but also involve data center infrastructure, growth in energy markets, and monetization of computing power—an integration that traditional mining cannot achieve.
Prospects for Bitcoin mining development.
Overall, we believe that most potential macroeconomic scenarios following ‘Liberation Day’ remain favorable for Bitcoin. The introduction of reciprocal tariffs could push the United States and its trading partners to increase inflation. While America's trading partners may face rising inflation, they will also have to contend with growth headwinds. This dynamic could force them to adopt more accommodative fiscal and monetary policies—these measures typically lead to currency depreciation, enhancing Bitcoin's appeal as a non-sovereign, anti-inflation asset.
In the United States, the outlook is more ambiguous. Both Trump and Bassett have expressed a preference for lower long-term yields, particularly concerning 10-year treasuries. While the motivations behind this can be speculated—such as reducing the debt service burden or driving asset markets—this stance typically favors interest rate-sensitive assets like Bitcoin. However, the current situation is quite the opposite. The yield on the U.S. 10-year treasury has fallen below 4% but then rebounded to around 4.5%, currently about 4.3%, due to skepticism about underlying trading closures, damage to the U.S. reputation, and the dollar's increasingly precarious status as the world’s reserve currency, while Trump's uncompromising tariff policies may further drive inflation up. However, this crisis is man-made and could quickly be reversed through tariff concessions and agreements.
However, these signals may also reflect a decline in future profit expectations for the stock market, triggering concerns about an impending economic slowdown. This brings key risks to the broader market—namely Bitcoin. If investors still view Bitcoin as a high beta, risk-seeking asset, then during a global economic downturn, this sentiment may lead Bitcoin to trade in sync with the stock market, even though its narrative as a long-term store of value persists.
Nonetheless, Bitcoin has performed relatively better compared to the stock market since ‘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. Therefore, market participants are increasingly recognizing Bitcoin as a reliable long-term store of value.
This article is republished with permission from: (Deep Tide TechFlow)
Original title: (What are the differences between Bitcoin miners and gold miners?)
Original author: James Butterfill
Translation: Aki, Wu Says Blockchain
‘They're all called mining! What are the specific differences between gold miners and Bitcoin miners?’ This article was first published in ‘Crypto City’
