Bitcoin’s Rising Inflows Threaten Gold’s Position as Store-of-Value, Analyst Warns
In recent months, there has been a significant increase in inflows into global bitcoin exchange-traded products, which could potentially pose a threat to gold’s long-standing position as the world’s primary store-of-value. According to André Dragosch, the Head of Research at ETC Group, there is a growing divergence between the fund flows into bitcoin and those into gold, indicating that bitcoin may be on the verge of overtaking gold as the preferred store-of-value.
Dragosch explains that a large majority of new investments in bitcoin are related to investments in U.S.-based exchange-traded funds (ETFs). These new ETF flows are becoming increasingly important for bitcoin’s overall performance. Data from ETC Group reveals that net flows into global bitcoin ETFs and products have seen a substantial increase since the beginning of February. This trend can be attributed, in part, to a slowdown in outflows from Grayscale’s converted GBTC fund.
The Block’s Data Dashboard further supports this observation, showing a deceleration in GBTC outflows since late January. Last Thursday alone, ETF inflows totaled $389.55 million, while there was an outflow of $168 million. BlackRock’s iShares Bitcoin ETF (IBIT) secured the largest share of inflows, receiving $224.3 million on that day.
Comparing the net inflows for bitcoin ETFs and global exchange-traded products from Canada, Europe, and Asia to those for gold, ETC Group data indicates that gold has experienced an increase in net negative flows since the start of the year.
Ryze Labs analysts share a similar perspective to ETC Group, noting that gold ETFs have seen a significant outflow of $2.4 billion since the beginning of the year, whereas bitcoin ETFs have collectively attracted $3.89 billion in inflows. This reinforces their belief that bitcoin serves as both a “risk-on” investment and a reliable safe-haven asset, leading them to predict that bitcoin will outperform gold in all market conditions.
Dragosch expects this trend to continue in the long term, ultimately disrupting gold as the prime store-of-value. However, he acknowledges that the current market capitalization of global gold ETFs is approximately three times larger than that of bitcoin’s ETP and ETF combined. He suggests that bitcoin’s market cap could potentially surpass gold’s within the next two years through price appreciation.
As of now, the price of bitcoin stands at $52,357, according to The Block’s Price Page. While the GM 30 Index, representing a selection of the top 30 cryptocurrencies, has slipped 1.72% to 114.39 in the past 24 hours, bitcoin itself has experienced a modest increase of over 1% during the same period.
It is important to note that The Block is an independent media outlet that provides news, research, and data. Foresight Ventures is a majority investor of The Block, and it invests in other companies in the crypto space. However, The Block continues to operate independently to deliver objective and timely information about the crypto industry.
In conclusion, the substantial inflows into bitcoin exchange-traded products, particularly U.S.-based ETFs, pose a potential threat to gold’s position as the world’s primary store-of-value. With increasing divergence between fund flows into bitcoin and gold, analysts believe that bitcoin’s dual role as a “risk-on” investment and a reliable safe-haven asset will lead to its outperformance of gold in all market conditions. While the current market capitalization of gold ETFs still exceeds that of bitcoin, there is a possibility that bitcoin’s market cap could surpass gold’s within the next two years through price appreciation. As the battle between bitcoin and gold intensifies, the future of store-of-value assets remains uncertain.