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3 Reasons Why Bitcoin ETFs Differ from Gold's $10 Trillion Case

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Fri, 10/15/2021 - 13:54
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Arman Shirinyan
Even though gold ETFs bring $10 trillion to its market cap, Bitcoin's story might be different
3 Reasons Why Bitcoin ETFs Differ from Gold's $10 Trillion Case
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The cryptocurrency community and the Bitcoin market are already reacting to positive sentiment coming from the potential approval of physically-backed Bitcoin ETFs. If the SEC finally approves the long-awaited product, numerous experts expect massive institutional inflows to the cryptocurrency market.

This belief is being fueled additionally by the popular case of gold ETFs that bring $10 trillion to the market cap. But Bitcoin ETFs may not have the same effect as gold ETFs, and here are the reasons why.

Asset's availability

Physically-backed ETFs are more valuable for investors since they are supported by real underlying assets. Gold ETFs are backed with actual gold, and the Bitcoin ETF will be backed with actual Bitcoin.

The day that gold ETFs dropped on the market, institutional investors were able to directly purchase a product that was backed by actual precious metal. By owning ETF shares, traders and investors are able to "own" actual gold without going to the bank and purchasing actual gold bars.

Gold ETFs
Source: ETF Database

It is a completely different story for Bitcoin. Most retail traders and investors today prefer buying Bitcoin directly from the centralized or decentralized exchange without having any deals with funds.

Bitcoin futures ETFs

While physically-backed ETFs are more valuable for institutional investors, derivative-based ETFs remain a variable solution for institutions. We will most likely see the shift in funding once actual Bitcoin ETFs drop, in addition to "fresh money" pouring into the crypto market.

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Institutions have already embraced Bitcoin

With the rapid development of the blockchain industry starting from 2017, most institutions have already joined the race and are currently investing more than $200 million in Bitcoin each week. While the trend changes with the price action, we can most certainly say that institutions are already here.

Bitcoin Market Cap
Source: TradingView.com

Though Bitcoin will most likely not receive the same funding coming purely from ETFs as gold did, it is still a great event for the entire crypto market, which indicates that regulators and institutions can no longer ignore Bitcoin.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.