A Look at the Sizzling Bitcoin ETF vs Gold ETF Showdown
In a Nutshell
- Bitcoin ETFs have raked in a whopping $3 billion in inflows over the past five trading days, while gold ETFs have seen a merely modest $1 billion outflow.
- This staggering $4 billion gap is the largest difference since the U.S. presidential election in November.
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US Asset Investers Shift Towards Bitcoin ETFs, Viewing Them as Superior to Gold as a Hedge
Bitcoin-related Exchange Traded Funds (ETFs) have been gaining major ground against their gold ETF counterparts in the U.S. With data from Standard Chartered showing a widening gap of $4 billion in inflows, it's time to dig deeper into this epic battle.
Standard Chartered's analyst, Geoffrey Kendrick, explained that Bitcoin ETFs are "a better hedge than gold against strategic asset reallocation out of the U.S." This observation is backed by the surge in U.S. Treasury yields and the decline in demand for U.S.-based assets. In other words, as uncertainty surrounding U.S. economic policies arises, investors are increasingly looking for alternatives - and Bitcoin ETFs are a top pick.
US Treasury term premiums, a measure closely correlated with Bitcoin, have reached a 12-year high, hinting at heightened demand for non-US assets. Meanwhile, the drop in demand for U.S.-based assets is evident in the low inflows for 30-year Treasurys. This, in turn, fuels the demand for Bitcoin ETFs.
Lastly, recent advancements in US-China trade negotiations have softened the appeal of gold, which traditionally serves as a hedge against geopolitical issues. With Bitcoin being essentially decentralized, it's seen as an ultimate hedge against problems in traditional finance, whether they stem from the private or public sector.
Bitcoin ETFs could maintain their winning streak, as Standard Chartered predicts they will set new record highs by the end of the second quarter, reaching $120,000. The optimism doesn't stop there; they also maintain an end-of-year target of $200,000, based on positive summer performance.
So, while gold might catch a break from trade negotiations, the demand for Bitcoin seems unwavering. Today, Bitcoin has seen a minimal decline of 0.3%, bringing its price to $94,979. The overall cryptocurrency market has experienced a minor dip of 2%.
Edited by Stacy Elliott.
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Enrichment Data: Behind the Scene
Bitcoin ETFs are gaining ground against gold ETFs for the following reasons:
1. Institutional backing and flexibility: Bitcoin ETFs have witnessed rapid institutional inflows, thanks to growing acceptance as a "digital gold" alternative. Regulated ETFs facilitate faster portfolio reallocation, contrasting gold ETFs, which often have slower institutional frameworks.[1][3][5]
2. Dual behavior during market turbulence: Gold serves as a traditional safe haven, but Bitcoin exhibits both risk-on and hedging behaviors during equity downturns.[1][3] This flexibility makes Bitcoin ETFs an enticing choice for investors who seek assets uncorrelated with traditional markets.[1][3]
3. Longer-term growth potential: Despite gold's 20% YTD gain, Bitcoin ETFs like IBIT have surged 116% since their launch, outperforming gold ETFs' 68% growth.[5] Analysts like Anthony Pompliano believe Bitcoin's smaller market cap and higher volatility position it to outperform gold as adoption expands.[4][5]
4. Treasury yield correlations: Rising yields typically pressure risk assets, but they may drive reallocation into assets perceived as currency hedges. Bitcoin's appeal grows as investors question traditional hedges' effectiveness, while gold's strength relies heavily on central bank demand, which is less responsive to yield shifts.[3][4]
Key Takeaways
| Factor | Bitcoin ETFs | Gold ETFs ||----------------|-------------------------|-----------------------|| 2025 YTD Returns | Mixed (BTC price down, ETFs up) [1][5]| ~20% price gain, 68% ETF growth [5]|| Catalysts | Institutional ETF inflows [1][4] | Central bank purchases [3][5] || Market Perception| Hedge + growth asset [1][4] | Pure safe haven [3][5] |
While gold might benefit from macroeconomic uncertainty, Bitcoin ETFs' structural advantages in liquidity and tech-driven appeal position them as a viable reallocation target amid shifting yield dynamics.[1][4][5]
- Bitcoin ETFs, with their growing institutional support, are perceived as a digital gold alternative, attracting rapid inflows and surpassing gold ETFs in terms of flexibility.
- Given its dual behavior during market turbulence, Bitcoin offers a unique blend of risk-on and hedging properties, setting it apart from gold as an uncorrelated choice for investors.
- Comparatively, Bitcoin ETFs have demonstrated impressive long-term growth potential, with some, like IBIT, outperforming gold ETFs considerably since their inception.
- Analysts like Anthony Pompliano attribute this outperformance to Bitcoin's smaller market cap and higher volatility, suggesting further growth as adoption increases.
- The correlation between rising yields and Bitcoin's appeal stems from the fact that rising yields pressure risk assets, but capital can be allocated towards assets seen as currency hedges.
- In contrast, gold's strength remains reliant on central bank demand, which may not respond as dynamically to yield shifts.
- As we move towards 2023, Standard Chartered's predictions suggest Bitcoin ETFs will set new record highs, reaching $120,000 by the end of Q2 and $200,000 by the end of the year.
- Thriving in a changing financial landscape, Bitcoin ETFs' liquidity and technology-driven allure make them an attractive reallocation target, pushing against the traditional safe haven status of gold ETFs.
