Bitcoin Spot ETF has attracted a net inflow of $10.6 billion since the beginning of January, while gold ETF has experienced a net outflow of $7.7 billion during the same period. This seems to suggest that funds are flowing from gold to “digital gold”. However, according to a recent research report by J.P. Morgan, this is not the case.
According to a report by the Financial Times, J.P. Morgan and Bloomberg data show that as of the 14th, Bitcoin Spot ETF has attracted a net inflow of $10.6 billion this year, while gold ETF has been heavily sold off, with a net outflow of $7.7 billion during the same period. This capital movement has led to the belief that investors are abandoning gold and turning to invest in “digital gold”.
However, J.P. Morgan’s latest analysis report points out that this argument is not valid. Gold ETF has been experiencing outflows since April 2022, and since then, the sell-off has continued at a roughly balanced pace. The listing of the Bitcoin Spot ETF in the United States has not accelerated the sell-off of gold ETF. During this period, gold ETF has experienced a net outflow of approximately $46 billion.
Despite the significant outflow of funds from gold ETF, data from the World Gold Council shows that individual investors have invested many times more funds into gold bars and coins. From September 2020 to December 2023, a total of $229 billion was invested in gold bars and coins.
In addition, as central banks around the world are increasingly inclined to hold gold as foreign exchange reserves, they have purchased a total of $155 billion worth of gold during this period.
Therefore, Nikolaos Panigirtzoglou, a global market strategist at J.P. Morgan, believes that the outflow trend of gold ETF does not reflect a dislike for gold among individual investors, but rather a shift in investment from gold ETF to physical gold bars and coins.
Weak demand for Bitcoin
J.P. Morgan’s analysis also shows that the demand for Bitcoin this year is not as strong as indicated by the Bitcoin Spot ETF. Although the net inflow of Bitcoin Spot ETF has reached $10.6 billion this year, data from Messari shows that investors have directly sold $6 billion worth of Bitcoin on exchanges since the beginning of the year.
This means that most of the inflow into Bitcoin Spot ETF actually comes from individual investors who originally held Bitcoin in digital wallets through exchanges or retail brokers. ETFs offer greater convenience and regulatory protection, which is why the growth of spot ETFs does not necessarily represent entirely new funds flowing into the cryptocurrency market.