U.S. Bitcoin ETFs Gather Over 50% of Gold’s Holdings in First Year

US listed Bitcoin ETFs have challenged the gold standard, surpassing 50% of gold ETF assets in less than a year. Bitcoin ETFs have attracted mainstream investor interest because they are a digital store of value, despite them being disruptive to the alternative assets space.

In the last 10 years, gold has been a great hedge against inflation and uncertainty. However,  Bitcoin with its limited supply and independence from traditional markets has been positioned next to it as an emerging alternative. According to reports,  Bitcoin ETFs have amassed $23.89 billion in assets while US listed gold ETFs have $137.3 billion in total net assets in 10 months.

Record Inflows Show Growth in Demand for Digital Assets

This year,  Bitcoin ETFs have seen unprecedented growth, taking in $70 billion of net assets (total net assets since January 2024). The speed of this growth has led to questions about changing investor sentiment as daily inflows into Bitcoin ETFs have been as high as $192 million to $893 million per day.

“There is no question that the Bitcoin ETFs have been well received, breaking all inflow records as they go,”  Ryan McMillin, Chief Investment Officer at Merkle Tree Capital, told reporters. This perspective draws attention to the validation of Bitcoin as a long-term investment, with appetite from the retail and institutional sectors alike.

Gold ETFs which have been around since 2004 and have been a standard hedge (though McMillin thinks Bitcoin is the “digital equivalent of gold”) now stands to be rivaled by Bitcoin ETFs.

Comparing Bitcoin and Gold’s Safe-Haven Status 

Based on available data, Gold has been a stable safe haven asset during economic downturns for decades. Compared to that, Bitcoin, also known as the “digital gold” has been recognized as a safe haven in a short period of time because of its scarcity and decentralization.

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Fidelity Investments’ Director of Global Macro, Jurrien Timmer, calls Bitcoin “exponential gold” both in terms of value and as a store of wealth and a speculation.

Sources say that Bitcoin’s appeal has gone beyond the regular “safe haven” characteristics. This allows it to be a portfolio defensive asset since its price moves less with stocks and traditional assets. Institutional investors are talking about this feature, and that’s why Bitcoin ETFs are sucking in so much capital so fast.

Bitcoin and Gold Emerge as 2024’s Top Performers

This year, 2024, Bitcoin has been on fire, up by 65% year to date to a current value of $69,533. Gold which typically performs steadily has gained 16% and is at $2,746.09 an ounce. Investors are looking for alternatives to fiat currency due to global economic pressures and that is pumping both assets.

Even though Bitcoin dropped 4% recently, McMillin believes it is still bullish and thinks it’s just minor sell-offs or rebalancing by big funds that caused the minor sway. “I wouldn’t expect we go much lower here, not without a serious catalyst.”

Conclusion

Expressing this by means of the relative sizes of these two exchange-traded fund (ETF) classes this week, Bitcoin ETFs just knocked out long-standing gold ETFs.

Bitcoin ETFs have become an overnight asset class that is literally challenging one of the most established alternative asset classes, in terms of setting  records as the  new asset class. Market dynamics may change but Bitcoin and Gold remain two of the best open market hedges against economic downturn.

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