A significant influx of capital into exchange-traded bitcoin products poses a long-term threat to gold’s status as the primary store of value, an expert has suggested. This is reported by The Block.
Andre Dragos, Head of Research at ETC Group, highlighted the growing divergence between flows related to crypto funds and gold.
“This could be the first sign that bitcoin is taking the crown from gold as the main savings instrument,” he noted.
The analyst added that the overwhelming majority of new investments in cryptocurrency are presumably linked to US-registered exchange-traded funds.
“These new ETF flows are becoming increasingly significant for bitcoin’s overall performance,” Dragos said.
According to ETC Group, the net inflow into cryptocurrency-based ETP has significantly increased since February. This trend is partly linked to a slowdown in capital withdrawal from the Grayscale Bitcoin Trust ETF. Meanwhile, there is an outflow of funds from gold.
Data from BitMEX Research indicates that over the past week, the total value of spot exchange-traded bitcoin funds in the US increased by $2.3 billion. The majority of the inflow was driven by BlackRock’s iShares Bitcoin ETF.
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Analysts at Ryze Labs also noted that since the beginning of the year, investors have withdrawn $2.4 billion from the 14 largest gold-based ETFs, while bitcoin products have recorded an inflow of $3.89 billion.
“This trend strengthens our confidence in bitcoin’s dual role as a risky investment and a reliable safe-haven asset. We still believe that cryptocurrency will surpass gold in both market roles,” the experts stated.
Dragos expects the trend to continue in the long term and “eventually bitcoin will undermine gold’s position as the primary store of value.”
However, he emphasized that the current capitalization of gold ETPs is approximately three times the total of similar cryptocurrency-based products.
“In this regard, bitcoin funds may be able to surpass gold-based instruments in capitalization over the next two years through price increases,” the expert believes.
Over the past 30 days, the leading digital currency has appreciated by 25% (CoinGecko). The asset is trading near $52,000.
Earlier, experts suggested a capital shift from gold ETFs to bitcoin funds. However, Bloomberg exchange analyst Eric Balchunas linked the movement of funds to FOMO in the US stock market.