Gold and Bitcoin are often compared as scarce non-sovereign assets. While there has been extensive discussion about their investment case as value storage tools, few have made comparisons at the production level. Both assets rely on mining — one is physical, the other is digital — to introduce new supply. The industrial characteristics of both are defined by cyclical economies, capital intensity, and a deep connection to the energy markets.

However, the mechanisms and incentive structures of Bitcoin mining differ subtly from those of gold mining, and these differences ultimately have a significant impact on the economic structures and strategic layouts of industry participants. This report will take you through some of their similarities, but more importantly, the substantial differences between them.

The scarcity of assets comes from physical and computational mining.

Gold mining is a process with a history of hundreds of years that involves extracting and refining metals from underground. It requires finding suitable ore deposits, obtaining permits and land use rights, and using heavy machinery to extract ore from underground, which is then processed chemically to separate the metals for subsequent distribution.

In contrast, Bitcoin mining requires repeated computational processes to solve batches of Bitcoin transactions in a competitive manner to earn newly issued Bitcoins and transaction fees. This process is known as Proof of Work, which necessitates procuring rack space, electricity, and specialized hardware (ASIC) to operate the computations efficiently, and then broadcasting the results to the Bitcoin network via an internet connection.

In both of these systems, mining is an inevitably high-cost process that supports the scarcity of each asset: the scarcity of Bitcoin is maintained by code and competition; the scarcity of gold 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 are generally able to reasonably and accurately forecast reserves, ore grades, and mining schedules, although initial predictions can vary significantly: about one-fifth of gold mining projects are able to achieve profitability during their lifecycle. The main costs — labor, energy, equipment, compliance, and rehabilitation work — can all be predicted with reasonable accuracy in advance. Depreciation mainly arises from normal wear and tear of equipment or depletion of reserves. The main uncertainties in the short to medium term are usually the stability of gold market prices, which tend to fluctuate less. Furthermore, almost all of these input costs can be effectively hedged.

In contrast, Bitcoin mining is more dynamic and unpredictable. Company revenue depends not only on the relative fluctuations in the Bitcoin market price but also on its 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 that miners need to continuously consider during their operations.

Therefore, our first distinction is that, unlike the relatively stable production forecasts of the gold mining industry, Bitcoin miners face the challenge of production uncertainty, which arises from the entry and exit of other industry participants and their strategic changes.

One of the most important costs for Bitcoin mining companies is depreciation, especially the depreciation of ASIC equipment. The chips in these Bitcoin miners are rapidly improving in efficiency, 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 — although a non-cash expense — and contrasts sharply with gold mining, where mining equipment has a longer lifespan because it has already undergone most of the efficiency improvements.

The production of Bitcoin, influenced by changes in industry competition and short-term depreciation cycles, puts continuous pressure on miners who need to reinvest in new hardware to maintain production levels — this is what professionals commonly refer to as the “ASIC hamster wheel.”

However, there is also a favorable fundamental difference between Bitcoin and gold in terms of income structure. Gold miners profit solely by extracting and selling the unreleased supply in reserves. In contrast, Bitcoin miners profit both by extracting the unreleased supply and through transaction fees. Transaction fees provide miners with a source of income from the released supply, which fluctuates based on the demand for Bitcoin transfers. As Bitcoin approaches its supply cap of 21 million coins, transaction fees will become an increasingly important source of income — a dynamic that gold miners do not have.

Note: The y-axis shows a bottom range of 80%.

Ultimately, a major long-term advantage of Bitcoin mining is the ability to reuse by-products of operations — heat energy. When electricity passes through mining machines, a large amount of heat energy is generated, which can be captured and redirected for other uses, such as industrial processes, greenhouse agriculture, or residential and district heating. This opens up new sources of revenue for miners. As mining machines become commoditized and the depreciation cycle extends, the impact of reusing heat energy may further increase. Similarly, gold miners can also benefit from selling by-products such as silver or zinc, which are typically identified in project planning and serve as elements to offset the costs of gold production.

Bitcoin mining has a brighter environmental future than gold mining.

As we all know, gold mining is essentially resource extraction and leaves a lasting physical footprint: such as deforestation, water pollution, waste ponds, and ecosystem destruction. In many areas, it has also raised 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 an opportunity 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 isolated (such as flared gas, excess hydropower, or constrained wind and solar energy).

Many people are unaware that Bitcoin mining also shows potential as a clean energy subsidy and can serve as a means of proving grid connectivity. By co-locating with renewable energy or nuclear power generation facilities, miners can improve the project’s economics before grid connection — without relying on public funding subsidies.

Finally, although this point has been well documented, it is worth noting that, compared to traditional industries, Bitcoin’s carbon emissions are on average lower and more transparent. It can be said that Bitcoin is even necessary for a smooth transition to a grid dominated by renewable energy.

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 Miner hardware, with the current average power consumption being only 20 watts per terahash (W/Th), which is five times more efficient compared to 2018.

Investment characteristics of Bitcoin mining: fast cycles and technology-driven

Both of these 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 scale their operations up or down more quickly based on market conditions. This makes Bitcoin mining more flexible, but also more volatile.

Publicly traded 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 traded Bitcoin miners as part of the technology sector, rather than traditional energy or materials sectors.

However, gold mining companies have a longer history and typically hedge their future production, which can reduce sensitivity to fluctuations in gold prices. They are usually classified within the materials sector and are 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 in recent years through direct or convertible equity issuance to support rapid hardware upgrades or data center expansion. As a result, Bitcoin miners are more reliant on market sentiment and cyclical timing, and typically operate within shorter reinvestment cycles.

Bitcoin Mining: Investment Opportunities in Energy, Computing, and the Future Financial Network

Gold and Bitcoin may tend to play similar macroeconomic roles in the long run, but their production ecosystems are structurally different. Gold mining develops slowly, belongs to physical extraction, and is harmful to the environment, consuming a lot of resources. In contrast, Bitcoin mining is faster, more modular, and may increasingly integrate with modern energy systems.

For investors, this means that Bitcoin miners are an imperfect digital analogy to gold miners. Instead, they represent a new class of capital-intensive infrastructure that merges investment opportunities from commodity cycles, energy markets, and technological disruption. Investors with a long-term investment perspective should view it as a unique and entirely 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 increasingly evolving environment towards distributed financial systems.

As an investment, Bitcoin miners not only provide an investment opportunity in scarcity but also involve the growth of data center infrastructure, energy markets, and the monetization of computing power – a fusion that traditional mining cannot achieve.

The development prospects of Bitcoin mining

Overall, we believe that most potential macroeconomic scenarios after “Liberation Day” remain favorable for Bitcoin. The introduction of reciprocal tariffs may push the United States and its trading partners to raise inflation. America’s trading partners may face rising inflation while also having to deal with headwinds to growth. This dynamic may force them to adopt more accommodative fiscal and monetary policies — which typically lead to currency depreciation, thus enhancing Bitcoin’s appeal as a non-sovereign, inflation-resistant asset.

In the United States, the outlook is even more uncertain. Both Trump and Basent have expressed a preference for lower long-term yields, particularly in terms of the 10-year Treasury bonds. Although the motivations behind this can be speculated — for example, to reduce the debt service burden or to boost asset markets — this position typically benefits interest rate-sensitive assets such as Bitcoin. However, the current situation is quite the opposite. The yield on the U.S. 10-year Treasury bond has fallen below 4% but then rebounded to 4.5%, currently around 4.3%, due to doubts about the underlying trades being unwound, damage to the U.S. reputation, and the increasingly precarious status of the dollar as a global reserve currency, while Trump’s uncompromising tariff policies may further drive up inflation. 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 significant risks to the broader market, namely Bitcoin — —. If investors still view Bitcoin as a high beta, risk-on asset, this sentiment may lead to Bitcoin trading in sync with the stock market during a global economic downturn, although its narrative as a long-term store of value remains.

Nevertheless, Bitcoin has performed relatively better than the stock market since the “Liberation Day”. This resilience highlights Bitcoin’s unique characteristics: it is a globally tradable, government-neutral asset with a fixed supply that is accessible 24/7 throughout the year. As a result, market participants are increasingly recognizing Bitcoin as a reliable long-term store of value.

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