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No, the Bitcoin ETF is not like the one for gold — it will be better

No, the Bitcoin ETF is not like the one for gold — it will be better
Snapshot
Whether it’s gold or bitcoin, granting users access is undeniably important, says Coinbase. But it's not the only thing that matters.
  • Bitcoin is in a similar situation as gold was back in 2004, before the launch of a spot gold ETF.
  • The comparison is common as optimism surrounds potential approval of a Bitcoin ETF.
  • Bitcoin enjoys tailwinds gold lacked, Coinbase analysts wrote in a new report.

Happy Tuesday!

Another day, another comparison between a potential spot Bitcoin ETF and the launch of one for gold back in 2004. A new Coinbase analysis asks us again to look at the context.

Let’s dive into it.

Bitcoin and gold

Gold traded at roughly $443 on November 18, 2004, the day of the launch of the first US gold spot ETF. Since, the asset is up a whopping 340%, to about $1,946.

The narrative goes: The Bitcoin ETF will open the door for a whole new swathe of investors just as gold did then.

After it debuted nearly two decades ago, the gold ETF reached more than $1 billion in assets in three days, Jennifer Murphy, CEO of Runa Digital, said in August.

“Gold prices broke out and sustained a multi-year bull run.”

That’s only a part of the story, analysts led by Coinbase head of institutional research David Duong wrote on Monday.

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Gold’s first ETF launch “expanded access to the gold market for many US clients who could not easily acquire or store physical gold,” Coinbase wrote.

In that sense, Bitcoin’s story is similar. The acquisition and custody of digital coins still necessitates domain-specific infrastructure such as crypto wallets.

While “transformative,” the direct influence of ETFs on gold “may be somewhat overstated,” said Coinbase.

Coinbase said that gold inflows “didn’t really take off until during the global financial crisis in 2008 through 2012.”

It’s a sign that Americans only turned to the asset when they needed it “as a hedge against economic instability” and not simply because it became widely available.

The only ETF to beat the gold ETF record was the ProShares Bitcoin futures ETF in 2021, which reached $1 billion in investments in just two days. The price impact on Bitcoin was negligible.

But Bitcoin enjoys tailwinds that gold lacked, according to Coinbase. There’s still more gold to be mined, whereas Bitcoin’s supply is restricted. Only roughly 2 million Bitcoins are left to mine out of a maximum supply of 21 million coins — a point the report found “under-appreciated.”

”Whether it’s gold or bitcoin, granting users access is undeniably important,” said the report. “However, what drives flows are the narratives that reinforce the unique characteristics of these assets in the context of changing market conditions.”

Bitcoin reached above $37,000 last week amid optimism about a window where the Securities and Exchange Commission could approve all Bitcoin spot ETF applications at once.

Crypto market movers

  • Bitcoin is down 0.8% in the last 24 hours, reaching $36,602.
  • Ethereum slumped by 0.6% in the same period, at $2,050.

What we’re reading

Tom Carreras is a Markets Correspondent at DL News. Got a tip? Reach out at tcarreras@dlnews.com

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