The launch of spot Bitcoin exchange-traded funds (ETFs) in the US has taken the global financial market by storm. However, investment bank research suggests that the surge in demand for BTC has nothing much to do with the Gold ETFs outflow.
Bitcoin ETFs winning?
As per the data, Bitcoin ETFs globally had attracted a net $10.6 billion year-to-date (YTD) as of March 14, 2024. These stats stood strong despite including huge outflows from the Grayscale Bitcoin Trust (GBTC). Over the same period, physical Gold ETFs recorded a sharp sell of around $7.7 billion while Gold price went on to hit all time high (ATH) of $2,200 per troy ounce.
A report by JPMorgan reveals that claims that investors are switching from physical gold to “digital gold” (Bitcoin) are contrary in nature. It mentioned that the outflows from gold ETFs began in April 2022 and have continued steadily, totaling around $46 billion.
The report pressed the data from the World Gold Council which depicts that private investors and central banks have poured huge sums into gold. This inflow stands around $229 billion and $155 billion for gold bars and coins, respectively. The data is from September 2020 and December 2023.
Nikolaos Panigirtzoglou, global market strategist at JPMorgan, explains that the outflow trend from gold ETFs does not signify an aversion to gold by private investors. However, it shows investors taking a shift away from physical gold ETFs to bars and coins.
He highlighted that this shift to the pandemic triggered behavioral changes as privacy and tangibility became more important concerns for investors. If we take a look at Central banks’ demand for physical gold, it is also driven by factors such as avoiding Western sanctions and custodial risks.
Inflows are not enough
JPMorgan’s analysis suggests that demand for Bitcoin may not be as strong as ETF inflows show. This comes in as investors reportedly sold $6 billion worth of BTC held directly on exchanges since the start of the year.
Panigirtzoglou noted that the inflows into bitcoin ETFs might have represented a rotational shift from digital wallets to the regulatory protection of ETFs. Meanwhile, the rally in both gold and bitcoin prices has been fueled by momentum traders.
Bitcoin recorded a rally of 60% gains in the last 60 days depicting bullish momentum in the market. BTC is trading at an average price of $66,077, at the press time.
