Investors Dumping Gold ETFs for Crypto

In 2024, gold-focused exchange-traded funds (ETFs) are witnessing a significant decline in investments, with a collective outflow of $2.4 billion, starkly contrasting with the substantial inflows into Bitcoin spot price-tracking ETFs.

Bloomberg Intelligence analyst Eric Balchunas shared on X (formerly Twitter) on February 14 that among the top 14 gold ETFs, only three have recorded minor inflows this year: VanEck Merk Gold Shares, FT Vest Gold Strategy Target Income ETF, and Proshares UltraShort Gold. The largest withdrawals were observed in BlackRock’s iShares Gold Trust Micro and iShares Gold Trust, where $230.4 million and $423.6 million were pulled out, respectively.

Conversely, the newly approved Bitcoin spot ETFs have attracted a total of $3.89 billion in investments and have experienced unprecedented trading volumes since their launch on January 11, as per Farside’s preliminary data.

Portfolio manager Bitcoin Munger noted the drastic shift in asset allocation, stating, “Not only is Bitcoin drawing significant investment, but gold is also experiencing a rapid depletion of assets under management (AUM) across numerous ETFs.” However, Balchunas suggested the shift away from gold ETFs might not directly indicate a move towards Bitcoin ETFs but could rather reflect a broader trend of investors chasing U.S. equity markets.

Bitcoin advocate Jameson Lopp highlighted this trend by contrasting the performance of gold and Bitcoin ETFs, indirectly questioning gold investor and noted Bitcoin critic Peter Schiff’s stance.

The disparity between gold and Bitcoin investments has been further accentuated by the declining price of gold in 2024, which has seen a 3.4% decrease since the year’s start, dropping to a two-month low of $1,993 per ounce on February 14. In contrast, Bitcoin’s value surged by 23.5% during the same timeframe, reaching a two-year peak of $52,483 on February 14.

The World Gold Council attributed the underperformance of gold to global gold ETF outflows and reduced speculative positioning, alongside pressures from strong U.S. economic data bolstering long-term Treasuries and the U.S. dollar.

Despite Bloomberg senior commodity strategist Mike McGlone’s earlier predictions favoring gold over Bitcoin in 2024, the current market dynamics seem to challenge his forecast. Both Bitcoin and gold have traditionally been viewed as valuable stores of wealth and preferred investment choices during economic and geopolitical uncertainties. ARK Invest CEO Cathie Wood remarked, “Relative to gold, Bitcoin has been on the rise. We anticipate this switch to Bitcoin will persist, especially now that accessing Bitcoin has become less cumbersome.”