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Are Gold Investors Turning to Bitcoin? Analyzing ETF Market Trends


Recent developments in the financial markets have sparked debate over whether investors are shifting their assets from gold exchange-traded funds (ETFs) to Bitcoin ETFs.

Despite the rapid growth of bitcoin ETFs in the US, research from investment banks suggests that the emergence of these digital asset funds has not significantly impacted gold ETF outflows.

How Bitcoin ETFs Are Not Causing Outflows in Gold ETFs

Bitcoin ETFs globally attracted $11.3 billion by March 21, even as the Grayscale Bitcoin ETF saw substantial outflows. Concurrently, gold ETFs experienced a $7.7 billion reduction, despite gold reaching a record $2,200 per ounce.

This led to speculation about a shift towards Bitcoin, often dubbed “digital gold.”

However, JPMorgan’s analysis challenges this view. It reveals that gold ETF outflows, starting in April 2022, predate the launch of US Bitcoin ETFs. These outflows have been consistent, indicating a trend not directly tied to Bitcoin ETF’s rise.

Bitcoin and Gold ETF Flows
Bitcoin and Gold ETF Flows. Source: Financial Times

Central banks added another $155 billion to their reserves. According to Nikolaos Panigirtzoglou from JPMorgan, this shows a shift in preference rather than a decline in gold’s appeal.

Interestingly, the appetite for Bitcoin as an alternative investment is growing, especially among the younger demographic. However, Bryan Armour from Morningstar and Nate Geraci from The ETF Store observe that the market link between gold and Bitcoin ETFs remains minimal for now.

“I’m sure there are a small contingent of investors who are shifting from gold to Bitcoin, but in reality I don’t think that outflows from gold correlate with the introduction of Bitcoin ETFs because any interaction between the two at the moment is limited and portfolios show that,” Armour said.

However during this week, even Bitcoin ETFs are experiencing net outflows. Farside Investors noted $836 million in total outflow from Bitcoin ETFs in the last four days, reflecting market volatility.

Date IBIT FBTC BITB ARKB BTCO EZBC BRRR HODL BTCW GBTC Total
18 Mar 2024 451.5 5.9 17.6 2.7 0.0 0.0 4.8 5.7 0.0 -642.5 -154.3
19 Mar 2024 75.2 39.6 2.5 0.0 0.0 0.0 0.0 0.0 0.0 -443.5 -326.2
20 Mar 2024 49.3 12.9 18.6 23.3 -10.2 19.0 2.9 9.3 0.0 -386.6 -261.5
21 Mar 2024 233.4 2.9 12.0 2.0 4.2 3.8 4.7 1.8 0.0 -358.8 -94.0
Bitcoin ETFs Flow Table. Source: Farside Investors

Despite these fluctuations, Bernstein and Standard Chartered have updated their Bitcoin outlook. Bernstein predicts a rise to $90,000 by year-end, citing strong market dynamics and ETF inflows.

Standard Chartered is even more optimistic, expecting Bitcoin to reach $150,000 by year-end and potentially $250,000 next year. These forecasts draw on the analogy with gold ETFs, suggesting a future where Bitcoin might mirror gold’s investment trajectory.

Top crypto platforms in the US | March 2024


Conclusion

In conclusion, the recent surge in Bitcoin ETFs globally has not resulted in significant outflows from gold ETFs, according to research from investment banks. Despite speculations about a shift towards Bitcoin as a digital gold alternative, the analysis indicates that gold ETF outflows predate the launch of US Bitcoin ETFs and are part of a broader trend. While Bitcoin ETFs are currently experiencing net outflows, forecasts from Bernstein and Standard Chartered suggest a bullish outlook for Bitcoin prices by year-end, potentially reaching $90,000 and $150,000 to $250,000, respectively. The market link between gold and Bitcoin ETFs remains minimal, with Bitcoin gaining popularity as an alternative investment among younger demographics.

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