Gold ETFs vs Bitcoin ETFs – Are Gold ETFs Really Suffering?

Understanding the Shift – Gold ETFs vs Bitcoin ETFs

Instagram | nftbuilds | Spot bitcoin ETFs attracted $5 billion, totaling $37.6 billion in assets under management.

Despite the allure of bitcoin ETFs, gold continues to maintain its stature as a reliable store of value. The price of gold is trading near its all-time highs. However, this hasn’t stopped a substantial outflow from gold ETFs, with $3.6 billion exiting U.S.-listed gold ETFs since the start of the year.

Meanwhile, spot bitcoin ETFs have seen an influx of $5 billion, boasting a collective $37.6 billion in assets under management. Excluding the expensive Grayscale Bitcoin Trust (GBTC), spot bitcoin ETFs have pulled in $12 billion, bringing their total assets to $14.2 billion.

Bitcoin’s 2024 Momentum

Bitcoin has surged 24% this year, whereas gold has dipped 1.6%. This performance difference highlights the strong demand for bitcoin, particularly as spot bitcoin ETFs have only recently become accessible after years of anticipation.

The rise in technology stocks has further fueled this demand for bitcoin, reflecting broader investor enthusiasm. Conversely, gold ETFs have been around for two decades and have well-established holdings. The amount of gold held by ETFs today—83 million troy ounces—is the same as it was in 2012.

Diverse Demand Drivers

Freepik | wirestock | Gold serves beyond investment; it’s essential in jewelry, electronics, dentistry, and held by central banks as a reserve asset.

Gold and bitcoin serve very different purposes and attract different types of investors. Gold’s uses extend beyond investment; it’s vital in jewelry, electronics, dentistry, and is held by central banks as a reserve asset. This diverse demand stabilizes gold’s price and cements its status as a safe-haven asset, bolstered by its 5,000-year history of human use.

Bitcoin, on the other hand, was initially designed as a currency but is now primarily an investment and speculative asset. Spot bitcoin ETFs have simplified the process of buying and selling bitcoin, potentially increasing demand. However, bitcoin’s market remains narrower than gold’s. In 2023, only a fifth of gold’s demand came from investors, with the rest from various other uses.

Stability vs Volatility

Gold’s broad base of demand helps stabilize its price, with other consumers compensating for the selling by gold ETF investors. This stability contrasts sharply with bitcoin, which is known for its extreme volatility and speculative nature. While bitcoin ETFs might perform well in the short term, their impact on gold ETFs is likely minimal for now.

Long-Term Perspectives

Freepik | drobotdean | Bitcoin’s volatile history appeals to risk-seeking speculators.

The ongoing success or failure of bitcoin ETFs is unlikely to affect gold ETFs significantly. Bitcoin’s relatively brief history of high volatility appeals to speculators seeking significant gains, whereas gold’s consistent, modest returns attract more conservative investors.

Ultimately, the gold ETFs vs bitcoin ETFs debate underscores the distinct roles these assets play in a diversified investment portfolio. Each has its strengths and caters to different investor needs and market conditions.

A Balanced Perspective

As the financial market evolves, it’s essential to recognize the unique attributes and value propositions of both gold and bitcoin ETFs. While bitcoin ETFs have captured the limelight this year, gold ETFs remain a robust investment with a long-standing track record. Balancing these assets can offer a diversified strategy that leverages the strengths of both in navigating the complex world of investments.