The Gold and Bitcoin Mining Showdown: Insights from the Yukon

I just returned from the Yukon where Nick Hodge and I toured various mining projects in one of the most remote regions of North America. 

Chris and Nick in a helicopter

While there, I was struck by the similarities of mining both Gold and Bitcoin.

Gold mining, while relatively straightforward in its basic economics, is marked by volatility and unpredictability.

And boy did I witness both of these things this past week. 

On Saturday, we visited the Eagle Gold Mine, which is operated by Victoria Gold Corp (TSX: VGCX). At the close of the week, the shares had settled at C$7.30, and the mine operations were running smoothly. New blasting activities were underway in the pit, and the mined ore was being trucked, crushed, conveyed, and placed onto the leach pad.

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Yukon territory landscape area of company

area landscape

digging area

Monday morning, however, a significant incident occurred—the leach pad collapsed. When trading finally resumed later that day, the shares plummeted by over 80%.

cbc news article heap leach failure

This sort of thing happens often in the world of cryptocurrency where projects can fail virtually overnight as the market cap implodes.

This volatility, coupled with the historic boom and bust cycles driven by new discoveries or technological advancements, makes gold mining stocks some of the most volatile assets you can own.

Maybe mining stocks and cryptos aren’t that different after all. 

Interestingly, the volume of gold mined each year has little impact on its price because nearly all gold ever mined is still in circulation, serving as a stable store of value for millennia. And because fresh gold is so difficult to extract, the new supply isn’t enough to significantly dilute its value. 

In contrast, Bitcoin mining operates differently.

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I once trekked deep into the Louisiana bayou to tour a Bitcoin mining rig running off of natural gas flare–a byproduct of extracting oil. While not nearly as remote as the Yukon wilderness, getting there was certainly a challenge. And, as always, I learned a lot that day. 

Chris on site

Chris touring bitcoin miner

New Bitcoins are mined at a predetermined, increasing level of difficulty and energy consumption. This is how Bitcoin is able to remain scarce and valuable.

In fact, it’s often referred to as “digital gold” for this very reason. 

As long as the value of newly mined Bitcoins exceeds these costs, mining will continue until the cap of 21 million Bitcoins is reached. 
Unlike gold, Bitcoin’s supply is fixed and does not adjust to its purchasing power, nor are there any commodity demands to influence its value. This inflexibility contributes to Bitcoin's price volatility. 

Additionally, Bitcoin miners also validate transactions, a crucial function for the system's operation. The fees they collect from this are an increasingly significant chunk of their overall revenue. 

Many investors have raised concerns about Bitcoin mining becoming uneconomical. With the Bitcoin halving recently behind us, many miners have had to sell off some of their BTC holdings to stay solvent as their supply issuance just got cut in half.

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In fact, Bitcoin is now more deflationary than gold for the first time in its history. And as subsequent halvings occur, that deflationary trend will only continue.

Even though certain miners will struggle and fail, the ones John Carl and I have handpicked for Digital Dispatch are poised to thrive, reaping the benefits of Bitcoin reaching new all-time highs in the months ahead. 

You can check them out here.

Keep coming back,

Chris Curl

Chris Curl
Editor, Daily Profit Cycle