As Bitcoin ETFs gradually catch up with gold funds, will Bitcoin surpass gold?

While industry observers note that the opposing fund flow trend may slow over time, the asset size of Bitcoin funds could one day exceed the $90 billion gold ETF market.

As bitcoin ETFs continue to see inflows about six weeks after their launch, investor money has been moving out of gold funds — although some believe the flow relationship is unlikely to last.

While analysts predict that bitcoin ETF assets could one day surpass those held in gold funds, industry observers note that the two sectors are not directly related.

The 10 spot Bitcoin funds that went public on January 11 have seen net inflows of about $5.5 billion so far.

Meanwhile, the largest gold ETFs, State Street Global Advisors' SPDR Gold Shares (GLD) and BlackRock's iShares Gold Trust (IAU), have suffered net outflows of about $2.7 billion and $350 million, respectively, since that date, according to ETF.com data.

“While gold cash may have little entry into bitcoin ETFs, their presence and the enthusiasm surrounding the new funds — which by many measures are the most successful launches in history — increase competition for the metal,” Bloomberg Intelligence analysts Eric Balchunas and Andre Yapp wrote in a research note on Monday.

Interest in U.S. spot bitcoin ETFs drove net inflows into cryptocurrency investment products for the fourth week in a row, according to CoinShares data. Despite another week of outflows from Grayscale Investments’ Bitcoin Trust ETF (GBTC), amounting to about $430 million, the category still saw net inflows of $598 million last week.

Are the flows of gold and Bitcoin directly correlated?

Bryan Armour, director of passive strategies research at Morningstar, said he was not yet willing to “draw a clear line” between flows into bitcoin ETFs and gold ETFs. He added that the two assets represent very different investments.
“Gold could see outflows because rate cut expectations have changed or because the market is shifting further into risk-on mode,” Armour told Blockworks. “These rationales fit in with how investors have traditionally used gold in their portfolios.

“If market risks increase, I expect the flow trend to reverse,” he added. “A bear market could cause investors to flee to higher-quality assets and investors to avoid risk, which would hurt Bitcoin flows.”

Matteo Greco, research analyst at Fineqia International, said he expects the opposite flow trends between bitcoin funds and gold to eventually cease in the long term.

He pointed out that although some investors view Bitcoin as digital gold and therefore choose to transfer funds from gold ETFs to Bitcoin ETFs, gold is still a safe-haven asset for many investors.

“I expect this trend to slow over time, with gold retaining its respected status while Bitcoin attracts more and more investment and recognition in the long run,” Greco said. “I see it more as a net inflow into Bitcoin ETFs rather than a complete substitution from gold to BTC.”

Will the asset size of Bitcoin ETF exceed that of gold funds?

Although GBTC has seen outflows of more than $7.4 billion since converting to an ETF, it remains the largest in the category with nearly $22.8 billion in assets under management.

BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) have about $6.6 billion and $4.7 billion in assets, respectively.

Bitcoin ETFs manage nearly $38 billion in assets to date. Meanwhile, gold ETFs hold more than $90 billion in assets, with GLD and IAU accounting for about $54 billion and $25 billion, respectively.

Greco noted that it took years for gold ETFs to attract similar levels of flow as spot Bitcoin ETFs. After the long-awaited Bitcoin ETF received regulatory approval, the funds had a historic start, with both IBIT and FBTC growing to over $3 billion in assets a month after launch. GLD only broke the $1 billion asset mark in its first 30 days of trading.

Greco said that as digitization and tokenization are expected to become more common, bitcoin ETF assets could eventually exceed those in gold funds.

“Without an ETF, traditional financial investors would not be able to invest directly in BTC,” he told Blockworks. “As a result, the impact of this product could be even more transformative than when the first gold ETF was approved in 2004.”

Balchunas said in the X post that it is “very likely” that assets under management of Bitcoin ETFs will exceed those of gold funds within two years.

But Amore said a bitcoin ETF disrupting the gold ETF asset is likely to be in the “distant future” — if it ever happens.

“I expect bitcoin ETF flows to continue to remain positive and bitcoin to rise,” he noted. “But to get the $90 billion in assets that gold ETFs have, it will take broader adoption of bitcoin ETFs and continued strong performance.”