Gold ETF vs Bitcoin ETF: A Comprehensive Comparison

Investing in a Gold ETF or a Bitcoin ETF can be a great way to diversify your portfolio, but which one is right for you? Gold ETFs are backed by physical gold, which means you own a portion of the metal itself.

The cost of owning a Gold ETF is relatively low, with some funds charging as little as 0.17% in annual fees.

Gold has long been considered a safe store of value, but Bitcoin is increasingly seen as a more modern and decentralized alternative. Bitcoin's limited supply and strong price performance have made it attractive to investors.

Gold ETFs, which debuted in 2004, took five years to reach the $20 billion milestone. In contrast, Bitcoin ETFs, launched in 2024, have grown at a staggering rate and are expected to surpass gold ETFs in cumulative inflows.

The assets under management (AUM) of Bitcoin spot exchange-traded funds (ETFs) listed in the United States have officially surpassed those of gold ETFs. This milestone reflects surging investor demand for regulated and accessible Bitcoin investment vehicles.

BlackRock's IBIT Bitcoin ETF alone attracted nearly $400 million in inflows in mid-October, a signal of growing confidence in Bitcoin's long-term potential as an investment vehicle.

Here's a comparison of the growth of gold and Bitcoin ETFs:

Bitcoin ETFs are expected to continue growing rapidly, with some analysts predicting they will surpass gold ETFs in AUM within two years.

Bitcoin has been gaining traction as a digital alternative to gold, with many investors referring to it as "digital gold." Bitcoin's limited supply, capped at 21 million coins, has made it particularly attractive in inflationary environments.

In the US, Bitcoin ETFs have surpassed gold ETFs in assets under management (AUM), a milestone that took gold ETFs 20 years to achieve. This growth is a testament to the increasing institutional and retail confidence in the digital asset.

Financial giants like BlackRock, Fidelity, and Ark Invest have launched Bitcoin ETFs, providing credibility and exposure to a wider investor base. Their involvement has fueled competition, driving significant inflows into these products.

The approval of Bitcoin spot ETFs marked a turning point for cryptocurrency adoption within traditional financial markets, allowing investors to gain direct exposure to Bitcoin without holding the asset itself.

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Institutional interest in Bitcoin has been growing, with 11 prominent Bitcoin ETFs collectively recording over $1.6 billion in new capital over the past week.

Mainstream acceptance of Bitcoin as an asset class is deepening, with institutions taking a more serious approach to crypto investments.

The launch of hybrid investment vehicles, such as the Bitcoin and Gold ETF, offers exposure to both Bitcoin and gold, reflecting the increasing desire among investors to diversify their portfolios.

Analysts at Standard Chartered predict that Bitcoin could soon reclaim its all-time high of $73,800, which could be influenced by upcoming political and economic events, including the U.S. presidential election.

I've always believed that investing is about striking a balance between risk and reward. A 10% weighting in gold is a good starting point for conservative investors, with half in physical gold and the other half in gold mining stocks or ETFs.

Gold's volatility is relatively low, with a 10-day standard deviation of ±3%. This makes it a stable addition to any investment portfolio.

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For investors with a longer horizon or a bigger risk appetite, Bitcoin is an option to consider. Its volatility is about eight times greater than gold's, with a 10-day standard deviation of ±25%.

Bitcoin's price can be quite volatile, but it also offers the potential for significant gains. Over a six-month period, it more than doubled in price, surging close to 130%.

Gold, on the other hand, has historically traded in tandem with gold-backed ETFs. However, this relationship appears to have broken down in 2023, as the two began to decouple.

Institutional interest in Bitcoin has been on the rise, with 11 prominent Bitcoin ETFs recording over $1.6 billion in new capital over the past week.

These ETFs, from companies like ARK 21Shares, Valkyrie, and VanEck, are a clear indication that institutions are taking a more serious approach to crypto investments.

The launch of hybrid investment vehicles, such as the Bitcoin and Gold ETF from Quantity Funds, is another notable development. This product offers exposure to both Bitcoin and gold, reflecting the increasing desire among investors to diversify their portfolios.

Analysts at Standard Chartered predict that Bitcoin could soon reclaim its all-time high of $73,800, which would be a significant milestone.

Gold has a rich history that dates back to the first gold ETF, which launched in the United States and several other countries in November 2004.

Investors were initially limited to gold miner stocks, bullion, and futures contracts, but these options came with a lot of complexity and risk.

Prior to the introduction of gold ETFs, investors had to worry about storage costs, insurance, and trading inefficiencies.

The first true gold ETF launched in Australia in 2003, but the big one was SPDR Gold Shares, which launched in the US in 2004.

Demand was unprecedented, with 50 million shares trading on its first day, causing major trading platforms to crash under the volume.

The price of gold saw a short-term bump after the launch of gold ETFs, but it's the long-term results that are truly impressive.

Gold ETFs became a $270 billion industry by 2023, with SPDR Gold Shares remaining the largest.

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Bitcoin spot ETFs in the US have surpassed gold ETFs in AUM, marking a historic shift in investor demand. This milestone was shared by Vetle Lunde, an analyst at K33 Research.

Major players like BlackRock and Fidelity are driving demand for Bitcoin ETFs, which is enhancing Bitcoin's credibility and accessibility.

Younger investors view Bitcoin as "digital gold", reflecting a shift toward modern, decentralized store-of-value assets.

Here's a comparison of the two leading financial assets in the ETF market: