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Paul Singer: Bitcoin over gold? Are you crazy?!

Paul Singer, principal of Elliot Management.
Tomohiro Ohsumi | Bloomberg | Getty Images

Hedge fund manager Paul Singer is "shocked" by Bitcoin's rise, especially given gold's fall.

"There is no more reason to believe that bitcoin will stand the test of time than that governments will protect the value of government-created money, although bitcoin is newer and we always look at babies with hope," Singer wrote in a letter to investors of his $23.3 billion Elliott Management on Jan. 27.

"If you want an alternative currency, check out gold. It has stood the test of thousands of years as a store of value and medium of exchange," Singer added.

"Better yet, it is not just a computer entry in the ether somewhere, and it is currently available at a good price. Bitcoin and its relatives represent an understandable impulse (anti-big-government, pro-freedom, pro-modernity), but we do not see how it actually survives. At least with gold you have to work really hard to dig the stuff up."

Rich hedge fund managers feel poor's pain

(Read more: Gold adrift as Fed meeting keeps traders on edge)

Singer used a separate section in his investor letter to reiterate the bullish case for gold.

"We think that gold is a unique investment asset, the only real money that has stood the test of time throughout recorded history," Singer wrote. "With its durability, finite and difficult-to-extract supply and natural allure, it is a store of value that should be particularly attractive at a time when monetary debasement is the major policy practiced by most developed countries to keep their economies afloat."

Singer believes that gold will be back in favor soon.

"If the global economy recovers strongly without a significant uptick in inflation, then gold might continue to be a neglected asset class. But low growth and high inflation are typical hallmarks of structurally unsound economies experiencing monetary debasement, so perhaps that phase is next, or soon to appear," Singer said. "We shall see."

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Singer may have lost on its gold investments in 2013, but overall his firm made plenty of money.

The flagship Elliott Associates fund gained 12.4 percent net of fees in 2013. The fund has achieved annualized returns of 14.0 percent since inception in 1977, among the best track records in the investment industry.

A spokesman for Elliott declined to comment.

(Read more: Paul Singer: Minimum wage hike would 'destroy' jobs)

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.