Comparing the Potential of Bitcoin ETFs vs. Gold ETFs

Sahana Kiran
Source – Unsplash

Bitcoin [BTC], the world’s largest cryptocurrency, is frequently likened to gold, often referred to as “digital gold.” Both BTC and gold are considered to possess characteristics of sound money and are perceived as ultimate safe-haven assets, sharing attributes like limited supply and scarcity. As exchange-traded funds [ETFs] gain attention, comparisons are being drawn between the performance of gold ETFs and the potential of Bitcoin ETFs.

The initial approval of the first gold ETF occurred in the United States in 2004. Subsequently, gold experienced a remarkable surge of almost 350% between 2004 and 2011. During this period, the price of gold soared from about $450 to over $1,820 in August 2011, representing an astonishing increase of 346%. Betting on the same and assuming Bitcoin ETFs receive approval, Ash Crypto predicted the price of BTC.

However, the possibility is questionable right now. In a recent report, NYDIG noted how gold funds entail a great deal of investments. There’s over $210 billion invested in gold funds. However, there’s only $28.8 billion in Bitcoin funds. NDYIG said,

“Bitcoin is about 3.6x more volatile than gold, meaning that on a volatility equivalent basis, investors would require 3.6x less bitcoin than gold on a dollar basis to get as much risk exposure. Still, that would result in nearly $30B of incremental demand for a bitcoin ETF.”

Given the current hype surrounding these products, it is expected that adoption will increase.

Also Read: BlackRock Spot Bitcoin ETF Could Bring $30 Trillion in Capital

Analyzing the growth of gold

Since the approval of gold’s first U.S. ETF, numerous changes have transpired in the market. ETFs did contribute to increased demand for the asset. However, it was a favorable macro environment that truly bolstered its growth. This encompassed factors such as the housing market in 2008, the dollar’s depreciation, China’s economic ascent, and a growing U.S. deficit.

Consequently, for Bitcoin to experience potential growth, it would rely on the dollar’s continued depreciation and broader adoption of cryptocurrencies. This is alongside the approval of ETFs. NYDIG wrote,

“So while the GLD ETF definitely didn’t hurt and probably brought some nice inflow to the gold market, macro was really in the driver’s seat over that period. A spot Bitcoin ETF can help with drumming up more interest into Bitcoin and will undoubtedly attract some fresh money into the space. But that won’t make one Bitcoin worth $100k single-handedly.”

Also Read: SEC Names 8 Bitcoin ETF Applicants on Federal Register