February 16, 2024
Greg Cipolaro

Research Weekly - Spot ETF Launches Set a New Standard


  • Spot ETF inflows surge this week, as the ETF launches have now achieved in a month what it took the launch of GLD to do in a year.
  • We look at the impact spot bitcoin ETFs might be having on gold ETFs.
  • A court ruling paves the way for increased redemptions of GBTC, which have slowed recently.

Spot Bitcoin ETFs Eclipse the Launch of GLD ETF

The launch of spot bitcoin ETFs has set the standard for launching single commodity backed ETFs, surpassing the highwater mark set by the launch of the SPDR Gold Shares ETF (GLD) in 2004. As of Thursday's close, spot ETFs have achieved a cumulative daily net flow of $4.7B driven by a recent resurgence in net inflows.

By comparison, it took GLD 250 trading days, nearly a year, to reach a similar level of cumulative fund flows, something the spot bitcoin ETF complex reached in only 25 trading days. This comparison considers the present value of 2004 - 2005 dollars, when GLD launched. Any analysis that does not take into consideration the time value of money (19 years is a long time) is ignoring one of the bedrock principles of finance.  

The launch of spot ETFs has been a rollercoaster ride, with a lackluster start followed by net outflows caused by GBTC. Nevertheless, the tide has turned with consistent net inflows, making the first month truly eventful.

Weekly 2-Feb-16-2024-06-27-40-4012-PM

Are Gold’s Pains Bitcoin’s Gains?

Despite inflation running higher than expected, gold has faced struggles this year, experiencing a 3.4% decline year to date. The precious metal reacted unfavorably on Tuesday due to a higher-than-anticipated CPI, and again on Friday with a higher-than-expected PPI. Meanwhile, bitcoin has surged 21.6% year to date, attracting significant investment into spot ETFs. This has led many to question whether bitcoin is (once again) overshadowing gold.

Data on fund flows reveals that US gold ETFs have witnessed a total outflow of $2.1 billion since the launch of spot bitcoin ETFs. Conversely, spot bitcoin ETFs have seen a cumulative inflow of $4.7 billion. Canadian spot ETFs and bitcoin futures-based ETFs have also experienced a combined net outflow of $559 million.

While gold and bitcoin may not necessarily attract the same investor base, the rise of bitcoin as a digital asset has undoubtedly diverted some attention away from gold. Bitcoin is often referred to as "digital gold," and its association with technology and innovation appeals to a younger and more technology-minded subset of investors.

In that context, bitcoin may be seen as the "faster horse" in the investment race, drawing funds away from the traditional safe haven of gold. However, it is important to note that real interest rates play a significant role in gold prices. Given the rise in real rates on a year-to-date basis, it is evident why gold has faced challenges. In contrast, bitcoin is not as heavily influenced by real rates in terms of returns. Its value is driven by factors such as market demand, adoption, and technological advancements.

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Grayscale Bitcoin Trust to See Renewed Outflows?

On Tuesday, the judge overseeing the Genesis bankruptcy case has dismissed Digital Currency Group's (DCG) objection to Genesis’s plan to liquidate its holdings in the Grayscale Bitcoin Trust (GBTC) and other Grayscale funds. This ruling now sets the stage for the sale of approximately 35.9 million shares of GBTC, valued at $1.7 billion, to meet the demands of creditors. However, the exact manner and timing of this sale remains uncertain.

The disposal of these shares could potentially result in renewed outflows from GBTC. Genesis, or any entity appointed by them for the liquidation process, may choose to sell the shares on the secondary market or redeem them directly with an Authorized Participant for cash. Regardless of the method chosen, the ultimate consequence is likely to be redemptions in the ETF, which has been intensely scrutinized. As we await clarity on timing of the sale, one potential indicator to watch could be the trading behavior of GBTC shares in relation to the fund's net asset value (NAV). Surprisingly, despite the fund experiencing continuous net outflows, GBTC has been trading at a premium to NAV during the recent spot rally. If these premiums narrow or transition to a discount, it could be an indication of Genesis offloading its shares.

The cumulative outflows from GBTC have already exceeded $6.9 billion and show no signs of tapering off, contrary to some analyses. Additionally, there is another GBTC position, 30.9 million shares worth $1.4 billion, held by Gemini as part of their collateral call from Genesis under the Earn program borrow. While it is inevitable that these shares will change hands at some point, the exact timing of this transaction remains unknown.

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Market Update

Weekly Market-Feb-16-2024-06-30-12-6631-PM

Bitcoin went on a tear this week, up 13.6% and breaking through the $52,000 level for the first time since 2021. The rally was largely propelled by inflows into the spot ETF complex and comes despite higher-than-expected inflation numbers, which temporarily affected the price of bitcoin with Tuesday’s CPI release. Equities also performed well this week, with the S&P 500 up 0.7% and Nasdaq Composite up 0.8%. Bonds struggled against the higher-than-expected inflation backdrop. Investment grade corporate bonds fell 0.4%, high yield corporate bonds were down 0.1%, and long term US Treasuries were down 0.8%. Gold struggled, down 1.5%, for the aforementioned issues with real yields ticking up again this week. Oil notched 2.4% despite growing supply, which is expected to outstrip demand according to a recent International Energy Agency report.

Important News This Week


Crypto Traders Scoop Up Bitcoin Options Bets at $65K and Higher - CoinDesk

BTC Price Target: Traders Call for $64,000 per Bitcoin as BlackRock IBIT Scoops $500M in One Day - CoinDesk

Crypto Fear & Greed Index Hits Highest Level Since Bitcoin's 2021 Record High - CoinDesk

Bitcoin ETF 'FOMO Rally' Could Send Price to All-Time High: Bernstein - Decrypt

Peter Thiel’s Founders Fund Made $200 Million Crypto Investment Before Bull Run - Reuters

Regulation and Taxation:

2024 Crypto Money Laundering Report - Chainalysis

Why Stablecoins such as Tether and USDC Still Worry the Fed - Bloomberg

Binance Founder Changpeng Zhao’s Sentencing Postponed to April - The Block


Digital Currency Group Reports Q4 Revenue of $210M, Up 59% Y/Y - CoinDesk

Ripple-Owned Crypto Custody Firm Metaco's CEO and Head of Product Depart - CoinDesk

Satoshi-Era Bitcoin Function 'OP_CAT' Dusted Off as Development Fervor Grows - CoinDesk

Upcoming Events

Feb 23 - CME expiry

Mar 12 - Feb CPI reading

Mar 20 - FOMC rate decision

April 21 - Bitcoin block reward halving

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