1 Crypto Gunning for Gold’s Safe Haven Supremacy

by Juan Villaverde
By Juan Villaverde

When Bitcoin (BTC, “A”) began correcting in mid-January, many talking heads believed it was because of a lack of demand for the Bitcoin spot ETFs.

At the time, I assured you it was just the cycles doing their thing. As Bitcoin fell back between Jan. 10 and Jan. 23, I said this sell-off likely had little to do with “disappointing” inflows into the ETFs. 

After all, Bitcoin had rallied close to 100% between early September 2023 and Jan. 10, 2024, coinciding with the ETF approvals. 

That meant it was due for a correction.

Ok, so the talking heads and crypto naysayers were wrong about why Bitcoin corrected. No shock there.

But there is another piece of this puzzle that I didn’t realize until I took a second look.

There was little “disappointment” in the days that followed the Bitcoin ETF approvals. Together, the new Bitcoin ETFs brought in about $700 million in their first week in business.

That led me to take a closer look at the days following the advent of the first gold ETF, SPDR Gold Shares (GLD).

Interestingly, Gold ETFs struggled to attract capital for some months after GLD began trading. Yet over time, GLD attracted sufficient capital to keep gold prices going up for more than six consecutive years.

Figure 1. Source: World Gold Council Click here to see full-sized image.

 

Interesting pattern, right? 

And here’s where things get really interesting:Despite trading for nearly 20 years, GLD has only attracted about 0.50% of the total gold supply to date.

But the U.S. Bitcoin ETFs already own 3.69% of the total BTC supply!

That is if we include GBTC, which has been around for a few years already.

Simply put: These numbers are staggering!

This highlights how limited the supply of physical Bitcoin is. If demand continues at this pace, the price of Bitcoin will have to skyrocket because the supply cannot increase to meet this demand shock.

Moreover, Bitcoin is already outperforming gold in terms of safe-haven demand. Over the past week alone, $5 billion flowed into the Bitcoin ETFs just as roughly $2 billion left GLD. 

Indeed, investors are already transitioning from gold to Bitcoin, a logical move considering gold's stagnation above $2,000 since its first approach in August 2011.

By contrast, Bitcoin has outpaced gold prices by over 600,000% since August 2011. 

In other words, for every dollar invested in gold back then, you would have $6,000 today if you invested in Bitcoin instead. 

On top of that, Bitcoin has surged over 100% against gold in just the past 12 months.

While gold remains a venerable safe haven, it simply cannot compete with Bitcoin's growth potential as it establishes itself as the premier safe haven asset. 

Bitcoin's characteristics — programmatic and limited supply, real-time auditing, ease of custody, transfer and exchange — are unparalleled. And unequaled.

Bitcoin represents an asset harder than gold yet as easily traded as electronic cash — a dual benefit unprecedented in human history.

This unique proposition explains Bitcoin’s meteoric rise from mere cents in 2010 to over $50,000 today, a phenomenon that continues to confound observers.

Some market commentators speculate that …

•  Bitcoin's influx can't persist, 

•  Demand will eventually wane and

•  Prices will correct. 

In the short term, they may perhaps be correct. But the long-term story will likely be different. What we've seen since Jan. 10 is just the beginning. 

The shift from gold to Bitcoin, with gold's market cap at over $13 trillion, suggests immense pent-up demand for Bitcoin. Even a mere 1% shift from gold to Bitcoin — $130 billion — would significantly impact prices.

Will gold investors switch to Bitcoin? Damn straight! As Bitcoin continues to outperform gold significantly, the shift seems inevitable. 

The upcoming halving, which will cut the new supply of Bitcoin by 50%, adds another layer to this dynamic.

What happens when a demand shock — ETF approval — meets a supply shock — the halving? Prices surge. 

Now, Bitcoin is the OG crypto, and most investors find it to be a portfolio mainstay.

But it will not offer you the kind of return it did to early investors. That’s because it doesn’t have the same type of growth potential.

Smaller cryptos, however, do.

That’s why I want you to watch my latest briefing with Dr. Martin Weiss. In it, I explain how you can target small-cap crypto projects to beat Bitcoin in this coming market to maximize your profit potential.

Watch it soon, though. We’ll be taking it offline on Monday.

Best,

Juan Villaverde

About the Editor

When econometrician and pro trader Juan M. Villaverde first applied his algorithms to Bitcoin years ago, he discovered a regular cyclical pattern. And he has since used it to build the world’s first crypto timing model based on cycles. Thanks to his analysis, the Weiss Ratings team has accurately picked the top and bottom of major crypto booms and busts.

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