Bitcoin ETFs gain as gold funds see outflows

May 29, 2025 (MLN): A divergence is emerging in U.S. exchange-traded funds as investors shift from gold to its so-called digital counterpart, Bitcoin.

Over the past five weeks, U.S. Bitcoin ETFs have attracted more than $9 billion in inflows, led by BlackRock Inc.’s iShares Bitcoin Trust ETF (IBIT).

In contrast, gold-backed funds have experienced outflows exceeding $2.8bn during the same period, according to data compiled by Bloomberg News.

This rotation comes as easing trade tensions reduce demand for traditional havens like gold, while Bitcoin’s perceived status as an alternative store of value strengthens amid rising concerns over U.S. fiscal stability.

Bitcoin recently touched a record high of $111,980, fueled by favorable regulatory developments including progress on a stablecoin bill and increasing macroeconomic uncertainty.

Gold, despite being up more than 25% this year, has pulled back from recent peaks, currently trading roughly $190 below its all-time high.

Analysts suggest this shift signals a growing acceptance of Bitcoin as a legitimate portfolio hedge. “I remain bullish on both gold and Bitcoin,” said Christopher Wood, global equity strategist at Jefferies.

“They remain the best hedges on currency debasement in the G7 world.”

However, skeptics caution that Bitcoin’s volatility continues to challenge its status as a reliable safe haven.

During past macroeconomic shocks, such as the August unwinding of the yen-funded carry trade, Bitcoin fell sharply alongside other risk assets.

Others argue that Bitcoin is gaining a distinct advantage, as Bloomberg reported.

“Bitcoin is more effective against financial system risks due to its decentralised nature,” noted Geoff Kendrick, global head of digital assets research at Standard Chartered.

He contrasted Bitcoin’s resilience with gold’s stronger performance during geopolitical events like tariff escalations.

Kendrick added that Bitcoin acts as a hedge through two primary routes: private-sector risks, such as the collapse of Silicon Valley Bank in 2023, and risks tied to government institutions, including concerns about U.S. Treasury stability.

“The recent threat to Fed independence (via Powell’s potential replacement) falls squarely into the second category, along with the tariff escalation and broader concerns about U.S. policy credibility,” he said.

Adding to Bitcoin’s growing appeal, it appears to be distancing itself from its reputation as a tech-adjacent risk asset.

“Over the past month, Bitcoin’s intraday correlation with Nasdaq, the dollar, and even gold, has been remarkably low,” said Dilin Wu, research strategist at Pepperstone.

“These shifts suggest Bitcoin may increasingly be viewed as a hedge or even a non-correlated asset class rather than just a speculative trade.”

The debate is further fueled by signs of fiscal strain. Moody’s Ratings recently downgraded the U.S. from its last triple-A credit rating, citing ballooning deficits and debt.

The move aligns Moody’s with Fitch Ratings and S&P Global Ratings, both of which already rate the U.S. below the top tier.

Despite Bitcoin’s surge in attention and inflows, gold remains the stronger performer so far this year, with gains of about 25%, compared with Bitcoin’s 15% rise.

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