According to ETF Institute co-founder Nate Geraci, Bitcoin exchange-traded funds (ETFs) could surpass gold ETFs in the next two years.
He believes that if the current trends persist, Bitcoin ETFs may catch up to gold ETFs, which have had a 20-year head start since their launch in 2004. Gold ETFs hold approximately $50 billion in cumulative flows, while Bitcoin ETFs have accumulated around $21 billion since their introduction.
Gold ETFs v Bitcoin ETFs (Source: Geraci/X)
The strong performance of Bitcoin ETFs
Bitcoin ETFs have demonstrated impressive performance in a short timeframe. Despite only being active for ten months, these funds have attracted significant investment. Geraci noted that the performance of Bitcoin ETFs has exceeded the expectations of many bullish supporters and challenged skeptics. Critics initially claimed there would be little demand for Bitcoin ETFs. However, as the inflows increased, their stance shifted, suggesting that recent inflows may primarily stem from hedge funds engaging in basis trading.
This week, Bitcoin ETFs saw an influx of $2 billion in net inflows, with BlackRock’s IBIT leading the way. The ETF secured over $1 billion weekly, indicating robust demand. Ark Invest’s ARKB and other funds like VanEck’s HODL, Bitwise’s BITB, and Fidelity’s FBTC also performed well, contributing to the overall success of Bitcoin ETFs. IBIT boasts $23 billion in net inflows, solidifying its position as a leading Bitcoin ETF.
Factors driving demand for Bitcoin ETFs
Multiple factors are fueling demand for Bitcoin ETFs. Morgan Stanley has recently increased its Bitcoin ETF exposure to $272.1 million, indicating institutional interest in this asset class. Geraci commented on the widespread demand, stating that it comes from various sectors and investors. This trend suggests that Bitcoin ETFs could gain further traction in the market, appealing to a broader range of investors.
The Securities and Exchange Commission’s (SEC) approval of options trading for Bitcoin ETFs will likely enhance liquidity and attract new investors. The SEC’s recent endorsement of applications from the NYSE and CBOE for options trading reflects a growing acceptance of Bitcoin ETFs. Eric Balchunas, an ETF analyst at Bloomberg, remarked that the approval aligns with Nasdaq’s decision, suggesting a positive trend for Bitcoin ETFs.
Implications of increased liquidity
The addition of options trading for all 11 Bitcoin ETFs could significantly impact the market. Geraci expressed optimism about this development, stating that options trading will deepen liquidity for spot Bitcoin ETFs. Increased liquidity may enhance the attractiveness of Bitcoin ETFs to institutional and retail investors. This potential growth in investor participation can further solidify Bitcoin’s position in the financial market.
As Bitcoin continues to perform positively, it has reached a price of $68,320, although it has yet to reach the $69,000 mark. The asset’s dominance has risen to over 65% for the first time since 2021, indicating a significant milestone for Bitcoin in the cryptocurrency landscape.
The trajectory of Bitcoin ETFs suggests they could surpass gold ETFs within two years. With increasing demand, improved liquidity, and firm performance, Bitcoin ETFs are positioning themselves as a compelling investment choice in the coming years.
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