US Bitcoin ETF on track to outpace gold funds in total assets under management

Bitcoin (BTC) ETF showed immense popularity, with peak inflows and volumes as the underlying coin reached a series of records, vaulting $88,000. The assets in Bitcoin’s ETF are on track to rival those of gold ETF in the USA. 

Bitcoin (BTC) ETF now hold upward of $84B, and are one of the biggest holders of physical coins. The assets under management now rival those in US-based gold ETF, a recently popular investment vehicle. The rapid appreciation of BTC may lead to additional inflows, as funds are drawing more mainstream attention. Traders expect a record week of inflows, after a period of accumulation starting in October. 

After the latest rally of BTC above $88,000, the IBIT fund by Black Rock rounded its daily trading volumes above $4.59B for the past day. Other funds also rallied, though BlackRock remained the most active buyer. The behavior of ETF traders on Monday may be setting up the pace for a week of new inflows amid BTC price records. The post-election rally spread to all BTC markets, though ETF exhibited the power of mainstream finance buyers.

In the longer term, ETF based on digital currencies may catch up with gold in terms of assets under management (AUM). Gold remains the much larger market compared to crypto, due to mature demand and tradition. Bitcoin still makes a fraction of the gold market, despite outperforming, but has a long-term outlook as a store of value. 

Gold gains popularity, BTC outperforms 

Gold ETF have been popular for the past few years, especially after the inflationary pressure from 2020 onward. The ETF saw more inflows in the past month, expanding AUM to $238B. In 2024, Western buyers still dominated, reflecting recent trends of inflation and the speculative value of gold. 

The collection of Bitcon ETF has to only triple its volumes to reach the levels of gold vehicles. Since their launch, ETF grew from 840K BTC held at the beginning of 2024 to 1.13M at the end of the year. The pace of growth accelerated with the new series of price records, setting the stage for additional growth. Traders predict Bitcoin ETF will rival gold funds in terms of asset management in the next 3-4 years. 

Actual BTC coins are becoming more scarce, as whales and older holders retain their wallets. ETF are creating a constant stream of demand, where BlackRock has remained a net buyer for most weeks. The current Bitcoin ETF are cash-settled, though they still hold BTC reserves through Coinbase Custody.

Global gold ETF saw net inflows for months-long streaks, boosted by the US market, with additional interest from Asian buyers. ETF are a significant part of the gold market, matching the emerging demand for spot gold. For physical-backed ETF, the yield to date is close to 30%, outperforming equities. However, the gold ETF now lag behind BTC as it enters price discovery mode. 

Bitcoin ETF saw $870M inflows in October, even before the record rally. In comparison, gold ETF drew in $4.7B from a much wider and mature market. Given the relatively short time frame of crypto, it may continue to grow its share of portfolios, both as a risk-on asset and as an outperforming hedge against inflation.

BTC and gold had a strong correlation in the past year, though spot gold started to backtrack in the past month. While BTC was setting price records, gold sank from a recent peak of $2,780 per ounce to $2,620.

ETF as a whole gained popularity with younger investor cohorts, who were used to active asset selection. ETF buyers are also more open to crypto assets in both direct form or as part of an investment vehicle.