Can Bitcoin ETF surpass Gold ETF in terms of asset size with the influx of large amounts of funds?

24-02-28 11:08

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Original Title: As bitcoin ETFs gain ground on gold funds, is a flippening in the cards?

Original Author: BEN STRACK

Original Translation: Deep Tide TechFlow

Introduction

Recently, Bitcoin ETFs have attracted a large influx of funds, while gold funds have shown outflows. Although some analysts believe that this trend is unlikely to be sustainable, industry observers point out that Bitcoin fund assets may one day surpass the $90 billion gold ETF market. This article will explore the trends in fund flows between Bitcoin ETFs and gold ETFs, as well as whether Bitcoin has the potential to surpass gold in terms of asset size.

Content

With the continued inflow of funds into Bitcoin ETFs six weeks after their launch, there is a trend of investors' capital flowing out of gold funds, although some believe that this flow of funds may not be sustainable.

Although analysts predict that Bitcoin ETF assets may one day surpass those of gold funds, industry observers point out that these two areas are not directly related.

Since its listing on January 11th, 10 Bitcoin ETFs have seen a net inflow of approximately $5.5 billion in total.

Meanwhile, according to data from ETF.com, since then, the largest gold ETFs - State Street Global Advisors' SPDR Gold Shares (GLD) and BlackRock's iShares Gold Trust (IAU) - have suffered net outflows of approximately $2.7 billion and $350 million, respectively.

Click here to read more: To measure the impact of Bitcoin spot ETF, analysts turn to gold.

Bloomberg analysts Eric Balchunas and Andre Yapp said: "Despite the fact that gold cash may rarely enter Bitcoin ETFs, their existence and the enthusiasm surrounding the new fund (which in many ways is the most successful launch in history) have increased competition for gold."

CoinShares data shows that the interest in a US-based Bitcoin ETF has driven net inflows into cryptocurrency investment products for the fourth consecutive week. Despite outflows of approximately $430 million from Grayscale Investments' Bitcoin Trust ETF (GBTC) for the second consecutive week, the category still recorded net inflows of $598 million last week.

Click here to read more: Bitcoin ETF trading volume surges after record crypto product inflows week.

Is the flow of gold directly related to Bitcoin?

Morningstar Passive Strategy Research Director Bryan Armour said he is not yet willing to directly link the flow of Bitcoin ETFs to gold ETFs. He added that these two assets represent fundamentally different investments.

Armour mentioned: "Gold may see capital outflows due to changes in expectations of interest rate cuts or further market shift towards risk mode, which are reasons that align with how investors traditionally use gold in their investment portfolios."

If market risks increase, I expect the trend of capital flow to reverse," he added. "Bear markets may cause investors to turn to high-quality assets and avoid risks, which will harm the inflow of funds into Bitcoin.

Fineqia International research analyst Matteo Greco said he expects the opposite flow trend between Bitcoin funds and gold to eventually stop in the long term.

He pointed out that although some investors see Bitcoin as digital gold and choose to move their funds from gold ETFs to Bitcoin ETFs, gold is still a safe haven asset for many investors.

Greco said: "I foresee this trend slowing down over time, and gold will maintain its respected position, while in the long run, Bitcoin will attract more investment and recognition. I see it more as a net inflow of funds into Bitcoin ETFs, rather than a conversion from gold to BTC."

Will Bitcoin ETF assets surpass gold funds?

Despite the outflow of funds exceeding $7.4 billion since GBTC converted to an ETF, it remains the largest in its category, managing assets of nearly $22.8 billion.

BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC) have assets of approximately $6.6 billion and $4.7 billion, respectively.

As of now, the total assets under management of Bitcoin ETFs are nearly 38 billion US dollars. Meanwhile, the total assets of gold ETFs exceed 90 billion US dollars, with GLD and IAU accounting for approximately 54 billion US dollars and 25 billion US dollars, respectively.

Greco pointed out that it took several years for the Gold ETF to attract traffic levels similar to the Bitcoin ETF. These funds had a historic start after the long-awaited approval of the Bitcoin ETF by regulatory agencies, with assets of IBIT and FBTC both growing to over $3 billion within a month of their launch. GLD only broke the $1 billion asset mark in the first 30 days of trading.

Greco said that as digitization and tokenization are expected to become more common, the assets of Bitcoin ETFs may eventually surpass those of gold funds.

He said: "Without ETFs, traditional financial investors will not be able to directly invest in BTC, so the impact of this product may be more revolutionary than what was witnessed when the first gold ETF was approved in 2004."

Balchunas stated in a post on X that the assets managed by Bitcoin ETFs are likely to surpass those of gold funds within two years. However, the possibility of Bitcoin ETF assets surpassing those of gold ETFs may be a "distant future".

He pointed out: "I expect the inflow of funds into Bitcoin ETF to continue to remain positive, and Bitcoin will make progress, but to reach the $90 billion assets of the gold ETF, Bitcoin ETF needs to be more widely adopted and continue to perform strongly."