“Gold ETFs are nowhere near as volatile as bitcoin ETFs,” Seyffart says.
Bitcoin is often referred to as “digital gold.”
James Seyffart, an analyst specializing in exchange-traded funds (ETFs) at Bloomberg Intelligence, maintains an optimistic view on funds based on bitcoin (BTC).
According to the specialist, bitcoin in its battle for ETFs against gold could emerge victorious, surpassing the precious metal in assets under management (AUM) in the coming years.
Despite gold’s strong recent performance, Seyffart highlights unique advantages on the structure and utility of bitcoin ETFs, which attract institutional investors and traders in search of volatile assets for dynamic strategies.
In principle, Seyffart recognizes the current strength of gold. “Gold has been on an absolute tear and inflows have picked up. “So, with the combination of inflows and the price rise, gold ETFs have absolutely moved away from bitcoin.”
The precious metal began the year below $2,500 per ounce and has maintained an aggressive upward trend, breaking the barrier of $4,000 per ounce, reaching a new all-time high in the fourth quarter of this year, as reported by CriptoNoticias. For their part, assets under management of gold-based ETFs have gone from $140 billion at the beginning of January to reach 289 billion dollars in Decemberas seen in the following graph.
Ultimately, however, Seyffart believes bitcoin ETFs “could be bigger than gold ETFs in terms of assets under management over the long term.” For now, bitcoin-based funds have $112 billion in assets under management, 61% below gold.
This growth potential is based on growing institutional adoption. The analyst explains that investment went from whales (investors with more than 1,000 coins in their wallets) to retailers, high-net-worth individuals and now institutions.
“There are some companies like Strategy that buy bitcoin directly, but others could be buying the ETF, especially the more mature ones, apart from corporate treasury strategies based on bitcoin,” adds the specialist.
Reasons why bitcoin could win the ETF battle against gold
Seyffart’s thesis focuses on how traders use these financial vehicles. He argues:
One of the reasons we think bitcoin ETFs could be larger is because they fit better with the strategies people use ETFs for: active trading, leverage, and shorting. Gold ETFs are not nearly as volatile nor traded as much in the trading community as bitcoin ETFs. Therefore, volatility acts as ‘hot sauce’ [un «condimento» que añade emoción y utilidad]giving bitcoin an advantage in this long-term battle.
James Seyffart, ETF analyst.
Unlike gold, seen primarily as a static haven, bitcoin offers greater utility in modern wallets. Says Seyffart: “bitcoin is a little more correlated with risk assets, but people use it for similar reasons: portfolio diversifier and theoretical hedge against currency devaluation.”
Seyffart delves into this aspect. “There are leveraged ETFs and other tools, so people use them to actively trade, generate leverage or go short, in a way that they don’t do with gold.” Thus, BTC behaves differently in environments of regulatory or political uncertainty.
As can be seen in the graph, although bitcoin continues to show its characteristic volatility, a panorama of greater technical maturity has begun to emerge, gradually reducing the peaks of extreme volatility that we saw in previous periods.
Institutional stability in the face of historical volatility
Although bitcoin is often called “digital gold,” Seyffart warns of a perceptual gap. «Many people see it as a store of value or safe haven, but markets fundamentally treat it as a risk asset. It is negotiated as such. Over time, could it change? Theoretically yes, but we are not close to that now.
However, Institutional participation via ETF could mitigate extreme price cycles. “Extreme bullish spikes and bearish dips will be somewhat limited now with institutions and ETF holders. I think drops of 70-80% probably won’t happen, although time will tell.
Seyffart calls the launch of bitcoin ETFs historic: “It is the most successful launch, especially as a group, but even iShares Bitcoin Trust (IBIT) [fondo gestionado por BlackRock] Individually he is one of the most successful of all time. This initial success reinforces the idea that, in the long term, the assets under management of these products could surpass those of gold.