Gold ETFs Reclaim Lead Over Bitcoin ETFs Amid Price Surge

Gold exchange-traded funds (ETFs) in the U.S. have regained their position as the leading asset class in terms of assets under management, surpassing Bitcoin ETFs. This shift is attributed to the recent surge in gold prices to a record high and the decline in Bitcoin's value.

Gold ETFs are currently managing close to $150 billion in assets, while the 11 Bitcoin ETFs, approved by the regulatory authorities last year, have over $93 billion in managed assets. In December, Bitcoin ETFs briefly surpassed gold ETFs due to the cryptocurrency's price increase following the election of the U.S. President, whose policies were anticipated to boost the digital asset industry.

Bitcoin reached an all-time high of nearly $109,000 in January but has since declined to around $84,000, a drop of about 25% from its peak. Concurrently, gold hit a record high of $3,014 per ounce as investors sought less volatile investments amid economic uncertainties and trade wars. Gold is traditionally seen as a safe-haven asset during periods of economic turbulence.

Bitcoin has exhibited similar trading patterns to tech stocks and other risk-on assets over the past year. Senior Content Editor Kent Thune noted that while Bitcoin has some safe-haven qualities, it has recently behaved more like a risk asset, leading to outflows in spot ETFs. Gold, on the other hand, is viewed as an inflation hedge and safe-haven investment in the current environment.

The new Bitcoin ETFs experienced unprecedented success last year, attracting significant capital from investors previously locked out of the crypto market. The funds collectively reached $3 billion in net flows just one month after their launch, surpassing the initial performance of gold ETFs 20 years ago. However, macroeconomic uncertainties and concerns about the new president's policies, including tariffs on trading partners, have led to substantial outflows this year, contributing to the decline in Bitcoin's price.

Despite the current trend, some analysts believe that Bitcoin's appeal as a speculative asset could reverse this situation. Eric Balchunas, an ETF analyst, suggested that while gold has won the current battle, Bitcoin could emerge victorious in the medium to long term. He noted that most investors prefer speculative assets like stocks and bonds, and Bitcoin's potential as a "hot sauce" makes it more attractive than gold, which is seen as a more stable but less exciting investment.