Gold ETFs Lose US$2.4B, Bitcoin ETFs Surge in 2024

Gold ETFs face US$2.4b outflow as bitcoin ETFs gain momentum in 2024

The year 2024 has been a tale of two assets: gold and Bitcoin. While the former has seen billions of dollars in outflows from exchange-traded funds (ETFs), the latter has attracted record inflows and volumes from spot Bitcoin ETFs.

According to Bloomberg intelligence analyst Eric Balchunas, the leading 14 gold ETFs have lost US$2.4 billion this year as of Feb. 14. Only three of them had seen minor inflows, while the rest suffered significant losses. The largest outflows came from BlackRock's iShares Gold Trust Micro and iShares Gold Trust, losing US$230.4 million and US$423.6 million, respectively.

The decline in gold ETFs coincided with a drop in the price of the precious metal, which fell 3.4% since the beginning of the year to a two-month low of US$1,993 per ounce on Feb. 14. Some of the factors that contributed to gold's lackluster performance were the reduction in speculative positioning, the strength of the US dollar, and the rise of long-term Treasuries.

In contrast, Bitcoin ETFs have seen a surge in demand and popularity this year, as the cryptocurrency reached new highs and gained more mainstream acceptance. The ten approved spot Bitcoin ETFs have seen aggregate inflows of US$3.89 billion this year, according to preliminary data from Farside. They also hit record volumes, with the VanEck Bitcoin Trust trading over US$1 billion on Feb. 12.

Bitcoin's rally was driven by several factors, such as the growing adoption by institutional investors, corporations, and retail platforms, the anticipation of the Bitcoin halving in April or May, and the innovation and competition in the crypto space.

Some analysts and investors have suggested that Bitcoin is taking market share from gold, as it offers a superior store of value and hedge against inflation. Cathie Wood, the founder and CEO of Ark Investment Management, said that the "substitution" of gold for Bitcoin is now underway. However, others have argued that gold and Bitcoin are not mutually exclusive and that they can coexist and complement each other in a diversified portfolio.

The future of gold and Bitcoin ETFs remains uncertain, as they face various challenges and opportunities. Gold ETFs may benefit from a rebound in the price of the metal, as well as the continued demand from emerging markets and central banks. Bitcoin ETFs may face regulatory hurdles, technical issues, and market volatility. However, both assets have proven their resilience and appeal over time, and they may continue to attract investors looking for alternative and innovative ways to invest.