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Bitcoin’s Gold ETF Flippening: When Will BTC Fund AUM Pass Precious Yellow Metal?

Last Updated March 1, 2024 9:34 AM
Shraddha Sharma
Last Updated March 1, 2024 9:34 AM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • Bitcoin ETFs could have a flippening moment against Gold ETFs in assets under management (AUM) within two years, analysts predict.
  • Current metrics show Gold ETFs lead with $92.12 billion in AUM across 19 funds, but Bitcoin ETFs are almost half that value.
  • Critics argue Bitcoin ETFs are drawing investments away from gold, with debates on the long-term implications.

The face-off between the traditional and digital store of value assets, gold, and Bitcoin has intensified after BTC ETFs began to gain ground over the precious metal. According to  Bloomberg’s Eric Balchunas, the shine of Bitcoin ETFs, especially amid the underperformance of gold, signals a potential shift in investor preference. It could be that Bitcoin ETFs flip gold ETFs in assets under management within the next two years.

Bitcoin Gains Ground Over Gold

Bitcoin ETFs are edging closer to gold ETFs in terms of assets under management. Gold currently holds the top spot among commodity ETFs, with $92.12 billion spread across 19 funds, as per data by Etfdb.com . In contrast, the broader category of cryptocurrency funds under currency ETFs holds BTC ETF in the category. As per a Dune analytics  dashboard, Bitcoin-specific ETFs like the Grayscale Bitcoin Trust and iShares Bitcoin Trust are collectively nearing the $50 billion mark.

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Assets under management (AUM) refers to the total market value of the investments that a financial institution manages on behalf of its clients. For Bitcoin ETFs, the figure has been arrived at by on-chain holdings. AUM indicates the level of interest and investment in the respective assets, with Bitcoin’s growing numbers reflecting increasing acceptance over traditionally bought gold.

Based on rankings by etfdb.com , Crypto ETFs rank eighth in average three-month returns and ninth in both aggregate assets under management (AUM) and average expense ratio across the board. In the category, Grayscale Bitcoin Trust boasts an impressive $24.19 million in total assets, with a year-to-date increase of 55.49%.

Bitcoin ETF’s could face an even bigger boom if Morgan Stanley were to enter the race. Major financial institution Morgan Stanley, with over $1.5 trillion in assets under management, is reportedly considering adding spot Bitcoin ETFs to its brokerage platform. This move, if finalized, could significantly increase access to Bitcoin for investors and further legitimize cryptocurrency within the mainstream financial landscape while contributing to the flipening of Gold ETFs.

ETF Correlation and Criticism

Economist Henrik Zeberg  suggests that the Bitcoin-Gold ratio could soar over 65 times. Economist Peter Schiff, a vocal BTC critic, argues that the shift towards Bitcoin funds from gold stocks is a speculative bet against gold, predicting that a crash in Bitcoin prices will ultimately benefit gold stocks.

Schiff said : “The most likely explanation for the weakness in gold stocks is that investors are selling them to buy #BitcoinETFs instead.”

 The analysis points to a potential future where Bitcoin could underscore the gold market on the back of its upward trajectory. He predicts this trend will reverse once gold gains momentum, expecting that funds currently invested in Bitcoin ETFs will flow back into gold stocks.

Meanwhile, Bitcoin is on a trajectory to reach a new all-time high, with its price near the $63,000 mark at the time of writing (February 29 2024). After peaking at over $68,000 in November 2021, BTC has reached this level for the first time in two years.

Bitcoin’s price rise has coincided with a surge in investments into Bitcoin ETFs, setting new benchmarks for both volume and inflow of funds. According  to Bloomberg’s James Seyffart, Bitcoin ETFs witnessed a record $673 million in inflows and $7.7 billion in trading volume on February 29 alone, although there were no new flows into $BTCO specifically.

Bitcoin Price vs Gold ETFs

Bitcoin ETFs are making significant strides against traditional gold ETFs. While the outcome of this contest remains to be seen in the long run, the implications for investors and the broader market are evident today.

As Bitcoin approaches new highs, spot ETFs are playing an important entry point into the asset class.

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