“Devaluation Deals” are making a comeback! Gold and Bitcoin ETFs attracted about 7 billion US dollars in 5 days, and the two scarce assets strengthened at the same time

The Zhitong Finance App learned that as the US fiscal deficit, government debt, and the outlook for the US dollar once again raised market concerns, investors are flocking to gold and Bitcoin at the same time instead of choosing between the two assets. According to the latest capital flow data, exchange-traded funds (ETFs) that track gold and bitcoin have collectively attracted a record inflow of about 7 billion US dollars over the past five trading days, and the two scarce assets are once again becoming an important safe haven direction for global capital.

According to data, in the past five trading days, SPDR Gold Shares (GLD.US) under State Street Investment Management attracted nearly $3.4 billion in capital inflows; BlackRock's iShares Bitcoin Trust ETF (IBIT.US) received a net inflow of about $1.5 billion.

Both funds ranked among the top ten US ETF capital inflows during the same period. Among them, GLD only lagged behind a few large stock ETFs, including the S&P 500 ETF (VOO.US).

It is particularly noteworthy that both gold and Bitcoin received massive capital inflows at the same time.

In the past period, when risk aversion in the market heated up, gold was often able to attract capital through its traditional safe-haven asset status, and Bitcoin's attributes as “digital gold” were further questioned. But now, the two assets, which represent different forms of “scarcity,” are once again strengthening at the same time.

An important factor driving this change is the market's renewed concern about the US government's huge financing needs, the trend of the US dollar, and the possible impact of the government's attempt to reduce long-term treasury bond yields.

US Treasury Secretary Vincent announced earlier that the Treasury will at least double the scale of long-term treasury bond repurchases. After the news was announced, US bond yields and the US dollar declined for a while, while gold and Bitcoin both surged. This has further strengthened investors' demand to find scarce assets whose supply cannot be easily increased by the government.

Gautam Chhugani, senior global digital asset analyst at Bernstein, said that the era of falling interest rates, which has continued for about 40 years, seems to be over, and as the size of sovereign debt rises to an unprecedented level, governments are facing higher and higher debt repayment costs. In this environment, investors may benefit from holding scarce assets such as Bitcoin that are difficult to create or dilute easily.

Recent market conditions have also brought “devaluation transactions” back into the spotlight. According to this trading logic, when government financial pressure continues to increase, and policy makers ease the debt burden through looser financial conditions, investors will be more inclined to hold assets outside the monetary system and whose supply is limited.

Gold has become a traditional choice due to its value storage and safe-haven properties developed over thousands of years, and Bitcoin is increasingly viewed by some investors as a tool to hedge against currency depreciation and financial risks due to its final supply being limited to 21 million units.

Eric Balchunas, a senior ETF analyst at industry research, said this is very important to Bitcoin's long-term investment logic because Bitcoin's core narrative is supposed to be “an asset that resists currency depreciation.”

Dalio, founder of Bridgewater Fund, also recently suggested that investors reduce bond allocations and allocate up to 10% to 15% of their portfolios to gold while holding a “small amount” of Bitcoin to deal with the risk of a potential US debt crisis.

Notably, the pace of capital inflows has accelerated markedly recently. GLD, which is worth about 155 billion US dollars, has accumulated a net outflow of about 2.8 billion US dollars so far this year, but it has attracted about 3.4 billion US dollars in capital in the last five trading days, indicating a marked change in investors' attitude towards allocating gold.

IBIT, which has a scale of about 60 billion US dollars, has remained relatively stable since this year, receiving a cumulative inflow of about 830 million US dollars during the same period, while the inflow volume reached about 1.5 billion US dollars in the last five trading days.

Noelle Acheson, author of “Crypto Is Macro Now,” believes that what is really worth paying attention to is not just capital inflows themselves, but capital inflows are clearly accelerating. She said that this capital flow momentum may mean that investors who previously had insufficient allocations of gold and bitcoin are rapidly increasing their positions.

The massive inflow of capital has also contributed to the recent simultaneous rise in the two types of assets.

Gold has accumulated a cumulative increase of about 13% this month. Recently, the price of gold broke through 4,600 US dollars per ounce; Bitcoin once strongly broke through the 80,000 US dollar mark. This simultaneous rise means that gold and Bitcoin are currently benefiting jointly from concerns about the US fiscal situation, government debt, and the purchasing power of the US dollar.

In the past, investors may have viewed gold and Bitcoin as competing alternative assets, but recent capital flows show that some investors have begun to allocate both at the same time, using gold as a traditional safe-haven asset, while using Bitcoin's fixed supply properties to hedge against long-term monetary and financial risks.

However, not all Wall Street institutions believe that “devaluation transactions” will continue to be the main driver for the rise of gold and Bitcoin.

Hardika Singh, an economic strategist at Fundstrat, believes that the momentum of this trading logic may be weakening, and stocks may eventually become more reliable hedging tools than gold or Bitcoin.

She pointed out that America's growing fiscal deficit is indeed a problem, but if the market gradually accepts that there is no clear solution to this problem in the short term, then investors may eventually adapt to this fiscal environment.

Under these circumstances, gold and bitcoin are still likely to continue to rise, but the reason driving the price increase is not necessarily due to concerns about currency depreciation alone.