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Bitcoin vs Silver ETFs: Digital Gold’s Explosive Growth Outshining Precious Metal King

Last Updated January 19, 2024 10:17 AM
Teuta Franjkovic
Last Updated January 19, 2024 10:17 AM

Key Takeaways

  • Bitcoin surges past silver, becoming second-largest commodity ETF
  • Grayscale’s Bitcoin Trust transformation fuels ETF market boom
  • Investors embrace new Bitcoin ETFs with enthusiasm, driving high trading volumes

Bitcoin has overtaken silver  to become the second-largest commodity in exchange-traded funds (ETFs) in terms of assets under management (AUM).

Bitcoin ETFs reached the milestone within a week of commencing trade. This move suggests a swift and substantial accumulation of investor interest and capital in the cryptocurrency.

Grayscale’s Transformation Boosts Bitcoin ETF Market

The recent surge in the Bitcoin ETF market is largely attributed to Grayscale’s Bitcoin Trust  converting into an ETF. This move not only established the largest Bitcoin ETF but also enhanced market liquidity. Grayscale now leads spot Bitcoin ETFs with approximately 647,651 BTC, amounting to $27.5 billion AUM .

This upsurge in Bitcoin ETFs has subsequently relegated silver to third place in the single commodity ETF asset class . Silver ETFs currently manage around $11.5 billion in AUM, spread across five funds. Meanwhile, gold continues to dominate, with $96.3 billion AUM distributed across 19 different ETFs.

ETF commodity list
Credit: ETF Database
Bitfinex’s Head of Derivatives, Jag Kooner told CCN that Bitcoin ETFs have exceeded Silver ETFs in the US in terms of size, driven by the substantial market interest they have received.
He explained:
“Grayscale’s conversion of its existing Bitcoin trust into an ETF, created the world’s largest Bitcoin ETF overnight, boasting over $29 billion in AUM. The level of trading activity we have since seen in the new Bitcoin ETFs reflect the pent-up demand for these products, and we expect that it will lead to increased liquidity and stability in the market.”
He added the company expects that there will continue to be strong interest.
“The ETF issuers have implemented competitive fee structures, featuring a range of discounted fees and fee waivers which should attract more investors and could lead to further competitive pricing among ETF providers. While some in the investment community still view cryptocurrencies as risky, the growth of these ETFs could pave the way for more innovative crypto ETFs and new underlyings such as Ether,” Kooner concluded.

Enthusiastic Market Embraces New Bitcoin ETFs with High Trading Volumes

Bitcoin ETFs have been met with a positive response from the market. In a just five days, the combined trading volume of the 11 Bitcoin ETF funds exceeded $12 billion. Analysts attribute this to a mix of strong investor demand and competitive fee structures offered by the ETF issuers. These elements are drawing in investors, contributing to improved market liquidity and stability.

Further emphasizing this trend, Eric Balchunas, a senior ETF analyst, pointed out  the performance of Bitcoin ETFs in one-week flow comparisons with all ETFs. Notably, two Bitcoin ETFs ranked in the top five and three in the top 10, competing with well-established ETFs like $VOO and $QQQ. This indicates growing investor interest and confidence in Bitcoin as a viable investment option.

Gold’s Price Surge Still Reflects Complex Market Dynamics

Gold prices have recently shown a significant upward trend , reaching an all-time high  of over $2,100 per ounce on December 4, 2023. This was been driven by a mix of factors, including a weaker dollar and speculation about the Federal Reserve’s reluctance to maintain aggressive rate hikes.

Gold price
Credit: BullionVault

The US Dollar Index, which measures the dollar’s value against other major currencies, has fallen more than 3% since early October. Additionally, geopolitical tensions, particularly in the Middle East, have played a role in boosting gold’s value.

The World Gold Council (WGC) has reported strong demand for gold , especially from central banks. In the first nine months of 2023, central banks purchased a record 800 tons, a substantial portion of the total demand. This buying streak is expected to continue for the remainder of the year. China and India are the two biggest gold buyers, accounting for more than half of global demand.

Bitcoin vs. Gold ETFs: Navigating the Duality of Volatility and Stability

As we progress through 2024, both Bitcoin and gold ETFs are witnessing pivotal moments. Bitcoin ETFs are at the forefront of reshaping the cryptocurrency market. Meanwhile, gold ETFs maintain their significant status in traditional investment strategies.

The decision between investing in Bitcoin or gold ETFs largely hinges on individual investor preferences and risk tolerance. Gold ETFs offer a more conventional and stable investment, anchored to a tangible commodity. On the other hand, Bitcoin ETFs present an opportunity to engage with a more volatile, yet potentially high-return digital asset. This choice epitomizes the diversified and evolving nature of today’s investment landscape.

Nevertheless, it’s crucial for investors to thoroughly understand the inherent volatility and uncertainties associated with these markets before committing to substantial investments.

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