The introduction of spot Bitcoin exchange-traded funds (ETFs) in the US has significantly impacted the global financial scene. Yet, research from investment banks indicates that the increased interest in Bitcoin might not be directly linked to the outflow from Gold ETFs.
Are Bitcoin ETFs Taking the Lead?
Data up to March 14, 2024, shows Bitcoin ETFs worldwide have seen a net influx of $10.6 billion year-to-date (YTD), a figure that remains impressive even when accounting for substantial withdrawals from the Grayscale Bitcoin Trust (GBTC). Concurrently, physical Gold ETFs experienced a steep $7.7 billion decline, despite the gold price reaching a new all-time high (ATH) of $2,200 per troy ounce.
JPMorgan analysis suggests the narrative that investors are transitioning from physical gold to Bitcoin, the so-called “digital gold,” doesn’t quite align with reality. The analysis notes that the exodus from gold ETFs started in April 2022, cumulating in approximately $46 billion in outflows.
This perspective is supported by World Gold Council data, indicating significant investments in gold, with private investors and central banks investing about $229 billion and $155 billion in gold bars and coins, respectively, between September 2020 and December 2023.
According to JPMorgan’s global market strategist, Nikolaos Panigirtzoglou, the drift from gold ETFs doesn’t suggest a dwindling interest in gold among private investors. Instead, it points to a preference shift towards tangible assets like gold bars and coins, particularly after the pandemic influenced a prioritization of privacy and tangibility. Central banks’ increased physical gold acquisitions are also seen as efforts to bypass Western sanctions and minimize custodial risks.
A Closer Look at the Inflows
However, JPMorgan proposes that the apparent robust demand for Bitcoin, as indicated by ETF inflows, might be overstated. This assumption is based on reports of investors offloading $6 billion worth of Bitcoin from exchanges since the year’s start.
Panigirtzoglou interprets the surge into Bitcoin ETFs as possibly a strategic move from digital wallets to the safer, regulated environment of ETFs, rather than a direct competition with gold. Meanwhile, the recent price rallies in both markets could be attributed more to momentum trading strategies.
Bitcoin itself has witnessed a 60% increase in value over the past 60 days, showcasing a bullish trend. As of now, Bitcoin’s trading price averages around $66,077.
This information is provided for general informational purposes only and should not be considered financial advice.