Will BTC's muted price swings trigger renewed ETF inflows?
In the past, most criticism from investment advisors against BTC as a hedge or an alternative to gold has been that it’s too volatile to be included in clients’ portfolios.
Bitcoin’s volatility and correlation is getting closer and closer to gold’s, which is underreported and perhaps one positive from this rough patch. The 60-day volatility index has dropped from over 60 to around 35 for BlackRock’s iShares Bitcoin Trust . Similarly, the gold ETF’s volatility dipped from 43 to around 25.
The big boy money out there is not interested in tech stock returns from BTC , they want gold-like returns, a true alternative asset because diversification is only free lunch. According to him, the “true alternative asset” status can only be achieved if both assets have similar volatility. It remains to be seen if BTC and gold will eventually close the volatility gap.
The shrinking volatility among the two assets has also coincided with ETF outflows. Notably, overall BTC ETF inflows topped $5B in early May. At the time of writing, the flows had dropped to nearly zero. Gold has seen even more investor exits.
For instance, gold ETFs recorded nearly $8 billion in outflows over the same period. For JPMorgan analysts led by Nikolaos Panigirtzoglou, this was a cool-off of the “debasement trade” or demand for macro hedges as investors anticipate a likely U.S-Iran deal. For the analysts, the debasement trade was at its peak during the early months of the West Asia crisis, which sparked.
As such, there is no need for macro hedges like gold or BTC if the energy shocks are addressed by a potential U.S-Iran deal. At the time of writing, BTC was trading at $73.5K, down by 11% from its Q2 high of $82.8K. However, based on the historical BTC/gold ratio, the bottom for BTC has been hit or could likely be formed soon.
BTC’s 60-day volatility has dropped sharply in May and nearly mirrors gold, which could soon make BTC attractive to institutional investors JPMorgan analysts believe BTC and gold ETF outflows mean the “debasement trade” may be cooling off on the back of a likely U.S-Iran deal. AMBCrypto was founded in 2018 with a mission to simplify and bring the latest blockchain and cryptocurrency news to our readers.
We have quickly grown into the digital news source for an emerging generation of cryptocurrency enthusiasts, reaching more than a million readers on a monthly basis, across the globe.
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