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News/Gold Loses Luster, Bitcoin ETFs Shine: Is This the Future of Investing?

Gold Loses Luster, Bitcoin ETFs Shine: Is This the Future of Investing?

Van Thanh Le

Feb 16 2024

3 months ago4 minutes read
Excited chibi robot holding Bitcoin ETF stands on gold bars in a futuristic city

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Bitcoin ETF Inflows Surge, BlackRock Leads the Charge

Bitcoin ETFs are experiencing a gold rush, with investors pouring billions into these investment vehicles. BlackRock's iShares Bitcoin ETF (IBIT) raked in a staggering $331 million in a single day, showcasing the growing institutional interest in the world's most popular cryptocurrency. This surge is part of a broader trend that saw nearly 9,300 Bitcoin added to ETFs in a single day, highlighting the growing confidence in Bitcoin as a legitimate asset class.

The Bitcoin ETF sector itself has been on a historic run, witnessing an unprecedented $477 million in inflows for 15 days straight. This influx has not only elevated BlackRock's Bitcoin assets beyond the impressive $6 billion mark but also solidified its iShares Bitcoin ETF as a frontrunner in the market.

bitmex research.png
Source: BitMEX Research

The scene is equally vibrant for other players like Bitwise and Fidelity. The Bitwise Bitcoin ETF (BITB) captured the spotlight with the second-largest inflow since its debut, adding a substantial $120.2 million. Fidelity's Bitcoin ETF (FBTC), although trailing with a $97.4 million influx, still signals a diverse range of investor strategies and appetites within the ETF ecosystem.

Diving deeper into the numbers, the landscape reveals a net inflow of $652 million for spot Bitcoin ETFs, this figure emerges even after considering a $174.6 million outflow from GBTC. Such net positive movements illustrate a compelling shift in the ETF domain, emphasizing the growing allure of both traditional and spot Bitcoin ETFs amid a high-demand, low-supply scenario.

However, this explosive demand for Bitcoin, partly fueled by ETF inflows, is sparking debates over the sustainability of its price. With the net U.S. spot ETF flow now exceeding 100,000 BTC—amounting to two-thirds of the expected annual reduction in Bitcoin issuance following the next halving—concerns about a demand-supply mismatch are becoming more pronounced, raising questions about the future market dynamics and the stability of Bitcoin prices.

k33.png
Source: K33 Research

This happened as Genesis, a crypto trading desk, received court approval to sell $1.6 billion in Grayscale Bitcoin Trust (GBTC) shares, as well as shares in Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic Trust (ETCG) to repay creditors. This decision came despite objections from Digital Currency Group, Genesis' parent company, regarding unequal creditor repayments due to cryptocurrency price increases. 

Genesis filed for Chapter 11 bankruptcy in January 2023 and disclosed having over $150 million in cash assets. The approval is part of Genesis' broader liquidation plan, aiming to avoid monthly fees and prioritize customer repayments, with further court review scheduled for February 26.  

Bitcoin ETFs Gobble Up Supply, Gold Loses Luster

Within recent trading sessions, Bitcoin ETFs gobbled up over ten times the amount of Bitcoin that miners can dig up. To put numbers on the table, on a single day, February 12, a whopping $493.4 million flowed into Bitcoin ETFs, which translates to a hefty 10,280 Bitcoins. In stark contrast, Bitcoin miners could only produce about 1,059 BTC, valued roughly at $51 million on the same day.

Compare the growth of Bitcoin supply to its price.jpg
Compare the growth of Bitcoin supply to its price. Source: CryptoQuant

Leading the charge in this financial revolution is BlackRock's iShares Bitcoin Trust, which alone attracted $374.7 million. Not far behind, Fidelity's Wise Origin Bitcoin Fund and Ark 21Shares Bitcoin ETF pulled in $151.9 million and $40 million, respectively. However, it's not all inflows; Grayscale and the Invesco Galaxy ETF saw some outflows, losing $95 million and $20.8 million, respectively, slightly tempering the overall enthusiasm.

Zooming out to a broader picture, on February 9, Bitcoin ETFs saw an aggregate inflow of about 12,700 BTC or $541.5 million, overshadowing the mining output of 980 BTC worth around $45 million. Once again, BlackRock led the influx, complemented by significant contributions from Fidelity and Ark 21Shares.

Bitcoin ETF Flow.png
Bitcoin ETF inflows. Source: farside

Anthony Pompliano, a vanguard of Bitcoin, casts a spotlight on Wall Street's intensifying craving for Bitcoin, with demand outstripping daily production by a whopping 12.5 times. He underscores a striking detail: about 80% of all Bitcoin hasn't budged in six months, hinting at a scarce tradable supply of roughly $200 billion. This crunch means that ETFs have snapped up 5% of the entire tradable Bitcoin stash in a mere month.

This frenzy is set against a backdrop of investors shifting their gaze from gold to Bitcoin, injecting $4.1 billion into Bitcoin ETFs as gold faced $3 billion in outflows. This pivot is not just about diversifying portfolios; it signals a paradigm shift in investment philosophy, positioning Bitcoin ETFs as the new darlings over traditional stalwarts like gold.

The burgeoning Bitcoin ETF market, juxtaposed with gold's outflows, narrates a tale of changing investor preferences and market dynamics. It's a testament to Bitcoin's ascending credibility as a mainstream investment contender, poised to challenge age-old safe havens like gold. This trend is more than a market fluctuation; it's a glimpse into the future of investment.

Bitcoin ETF Fee Wars & Institutional FOMO Fuel Market Boom

Bitcoin is back in the big leagues, with 75% of new investments coursing through the spanking new wave of spot Bitcoin ETFs that hit the US market. This ETF-driven surge has pushed Bitcoin's market cap above $1 trillion, a feat last seen in November 2021.

In a strategic chess move within the financial arena, VanEck took the lead by slicing its sponsor fee for the VanEck Bitcoin Trust (HODL) to a mere 0.20%, a reduction from the previous 0.25%. This change is slated for February 21, following an official nod from the US Securities and Exchange Commission (SEC). 

Not to be outdone, Fidelity has also entered the fray, slashing the total expense ratio (TER) for its Fidelity Physical Bitcoin ETP in Europe from 0.75% to an impressive 0.35%. These cuts are not merely isolated events but part of a larger, industry-wide scramble to lower investment costs, a clear bid to woo a larger investor base.

This fee reduction frenzy signals a broader "fee war" that's heating up on American soil, with asset managers fiercely undercutting each other to secure a competitive advantage. The battlefield extends across the Atlantic, with European Bitcoin ETPs from giants like Invesco and WisdomTree joining the fray, matching Fidelity's aggressive pricing strategy.

Rocket launching from Bitcoin-shaped launchpad, leaving trail of Bitcoin symbols.webp

Such strategic fee cuts are poised to significantly boost the allure of Bitcoin ETFs and ETPs, potentially beckoning a larger swath of both institutional and retail investors to the crypto sphere. By lowering entry barriers, these funds aim to not only become more accessible but also to enhance their performance, appealing to a wider audience.

The surge in ETF investments, coupled with the aggressive fee reductions, heralds a new chapter in Bitcoin's institutional embrace. With industry titans such as BlackRock, Ark, and Grayscale wading into the fee reduction battle, the market is bracing for heightened liquidity and stability. The collective worth of spot Bitcoin ETF products now surpassing $10 billion marks a significant leap in institutional investment, setting a vibrant tone for the cryptocurrency's market dynamics and investor sentiment.

Conclusion

Bitcoin's ascent into the big leagues is undeniable, fueled by a tidal wave of ETF inflows and strategic fee reductions. BlackRock's dominance, coupled with industry giants joining the fray, signals a paradigm shift in investor sentiment. Bitcoin ETFs are not just gobbling up supply, they're challenging gold's reign as the safe haven of choice. 

With scarcity looming and demand outpacing production, one question remains: can this unprecedented rally be sustained? Only time will tell, but one thing's for sure: the future of finance is increasingly intertwined with the fate of Bitcoin.

FAQs

1. Why are Bitcoin ETFs experiencing such a surge?

Several factors are driving the surge: growing institutional interest, the launch of spot Bitcoin ETFs, and strategic fee reductions by major players like BlackRock and Fidelity. This has led to massive inflows, exceeding daily Bitcoin production and potentially creating a supply squeeze.

2. What are the implications for the future of Bitcoin?

The ETF boom signals mainstream acceptance of Bitcoin as a legitimate asset class. Increased demand and limited supply could push prices higher, but concerns about sustainability exist. The future depends on various factors, including the market's ability to absorb the influx and potential regulatory changes.

3. How does this impact traditional safe havens like gold?

Investors are shifting their gaze from gold to Bitcoin, seeking diversification and potentially higher returns. Bitcoin ETFs offer exposure to the cryptocurrency without directly owning it, making them an attractive alternative. This trend could erode gold's dominance as the go-to safe haven asset.

4. Should I invest in Bitcoin ETFs?

This decision depends on your individual risk tolerance and investment goals. Bitcoin is a volatile asset, and past performance doesn't guarantee future results. Carefully research and understand the risks involved before making any investment decisions. Consider consulting a financial advisor for personalized guidance.

This article has been refined and enhanced by ChatGPT.

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