BlackRock’s gold ETF declines, but its Bitcoin ETF surges with massive inflow

BlackRock has seen around $423 million fleeing out of its gold exchange-traded fund (ETF), iShares Gold Trust, since the start of this year. Ironically, its newborn Bitcoin-backed fund has recorded massive inflow, according to data from BitMEX Research and Bloomberg ETF analyst Eric Balchunas. BlackRock’s Bitcoin ETF inflow tops $5 billion since its first trading day.

Meanwhile it’s a pretty bad scene right now in the gold ETFs category… via @SirYappityyapp in our just published weekly flow note pic.twitter.com/C0T17JZpiA

— Eric Balchunas (@EricBalchunas) February 14, 2024

The gold ETF market is bleeding. The majority of gold ETFs show a negative flow of funds for the year-to-date, indicating a general trend of investors pulling funds out of gold fund. SPDR Gold Shares (GLD), one of the largest and most traded ETFs, shows the heaviest outflow at around $2.3 billion. Only three ETFs have a positive inflow, with VanEck Merk Gold Shares leading with around $16 million inflow.

While gold ETFs have lost their glitter, spot Bitcoin ETFs have seen strong inflows. Over $10 billion was poured into currently traded spot Bitcoin funds (excluding Grayscale Bitcoin Trust) as of February 15, BitMEX Research’s data shows. These funds have also accumulated over 1% of Bitcoin supply within a month of trading.

Despite the stark difference in inflow dynamics, Balchunas suggests that the rotation out of gold does not necessarily indicate reallocation to Bitcoin ETFs. However, it may reflect a broader trend of Fear of Missing Out (FOMO) on rising US stock prices.

Balchunas said in another post that the growth in spot Bitcoin ETFs is significantly faster compared to a well-established gold ETF like GLD.

The NET cumulative flows for the 10 bitcoin ETFs (incl GBTC) has doubled in past 3 days to over $3b (for context it took $GLD nearly 2yrs to get to this point) after another half a billion yesterday. The Nine alone are nearing $10b in flows. Chart via ⁦@BitMEXResearch⁩ pic.twitter.com/jTht9wDqVf

— Eric Balchunas (@EricBalchunas) February 13, 2024

Sharing a similar viewpoint, Matt Hougan, Chief Investment Officer of Bitwise, previously noted Bitcoin ETFs’ exceptional performance compared to gold ETFs in terms of early inflows.

Historical context: It's really unusual for new ETFs to have inflows every day.

Here's the daily fund flows for GLD (the first gold ETF) after its launch (h/t @etfcom). It's one of the most successful ETF launches of all time. In month 1, it had:

* 8 days of positive flows

*… pic.twitter.com/r3oYLBgbgp

— Matt Hougan (@Matt_Hougan) February 9, 2024

The respective price movements of the underlying assets have further exacerbated the current divergence between gold and Bitcoin investment vehicles. Gold is currently trading at around $2,000, down over 3% year-to-date. On the other hand, Bitcoin broke through $52,000, its highest level since 2021.