Banking Giant Citigroup Compared Gold and Bitcoin ETFs: Will Similar Processes Occur? Here are the Details

It’s possible that new exchange-traded funds could benefit Bitcoin as an asset class, but in the near term it’s more likely that the cryptocurrency will rediscover its high correlation with stocks, according to Citi.

Citi Says Launch of New ETFs May Not Affect Bitcoin Like It Affects Gold

The launch of spot Bitcoin ETFs in the US has been anticipated for months, with many investors thinking they could revolutionize investing in Bitcoin like the SPDR Gold Shares ETF (GLD) did for gold in 2004.

Bernstein recently said Bitcoin could skyrocket to $200,000 by the end of next year with Bitcoin ETFs.

Citi analyst Alex Saunders noted that only time will tell, but the path for crypto is more uncertain than it was for gold.

“Bullion ETFs have still taken several years to crystallize the holdings and AUM that structurally impact spot gold prices and increase trading,” Saunders said. “This historic shift required a meaningful catalyst, such as the Great Financial Crisis and subsequent zero policy rates by monetary authorities.”

He also added that Bitcoin was newer and less established than gold before the launch of gold ETFs.

It behaves very differently than gold, and the popular narrative of Bitcoin as a safe haven or inflation hedge has not been firmly embraced by investors. “This is in stark contrast to the thousands of years of history of the yellow metal,” Saunders said.

“Our analysis likens the cryptocurrency to an early-stage network that is still experiencing an adoption cycle, meaning BTC is less likely than gold to be used as a portfolio hedge during financial turbulence.”

He said equity betas are still large for cryptocurrencies but negative for gold.

Saunders also added that although cryptocurrencies’ long-term positive correlations with stocks have fallen, they are likely to return to levels near historical averages over time.

*This is not investment advice.