Bitcoin ETFs Eating Gold’s Lunch

Bitcoin is already eating gold’s launch following the launch of much-anticipated spot Bitcoin exchange-traded funds (ETFs), according to a recent chart from J.P. Morgan.

The graph illustrates a marked inflow into Bitcoin funds, while gold ETFs are seeing a concurrent outflow.

Gold flow consistently moving out while btc flows move in pic.twitter.com/Y1A75nAZBa

— Tom Dunleavy (@dunleavy89) January 31, 2024

This movement points to a growing preference for digital assets over traditional havens among investors.

The rise of Bitcoin ETFs

The launch of spot Bitcoin ETFs has been a watershed moment for cryptocurrency, akin to the introduction of gold ETFs in the early 2000s that revolutionized the way individuals and institutions could access precious metals.

Now that spot Bitcoin ETFs have entered the arena, they’re not just bringing a new form of investment to the forefront—they’re directly challenging gold’s long-standing position as a store of value. The graph provided by J.P. Morgan underscores this shift.

This trend gains further credence from industry leaders like Adam Back, who predicts Bitcoin is on track to outshine gold and become the largest ETF commodity.

In just a short span, Bitcoin ETFs have amassed $27.5 billion, eclipsing the silver ETFs and setting sights on the $90 billion invested in gold ETFs.

Digital gold vs. traditional safe haven

Against this backdrop, precious metals have seen flat to declining trade volumes, indicating a possible correlation with the launch of Bitcoin ETFs.

Nicky Shiels of MKS PAMP remarks that in a mere 15 days, inflows into U.S. Bitcoin ETFs surpassed $25 billion, a figure comparable to the market capitalization of the largest gold producer, Barrick.

With Bitcoin ETF assets under management (AUM) now ranking as the second largest U.S. commodity ETF after gold, the narrative of Bitcoin as the new “digital gold” gains momentum. However, while Bitcoin ETFs have made remarkable strides, they still have a considerable distance to cover before they can match the $250 billion known investor holdings in all precious metals.

Looking ahead, Mike McGlone of Bloomberg Intelligence provides a nuanced perspective, suggesting that gold’s role may evolve in the face of a potential economic downturn. In a world becoming increasingly digitized, he posits that gold may appear “naked” if not paired with Bitcoin.

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