Why Traders Are Going Bonkers for ETFs and Gold (And Maybe Digital Gold?)

by

In an attempt to make sense of the totally unpredictable financial markets that could easily be mistaken for a toddler’s first attempt at painting, traders have decided to dive headfirst into the wild world of exchange-traded funds (ETFs). These ETFs are about as different from one another as a cat and a vacuum cleaner, but hey, that’s the market for you. According to Bloomberg Intelligence, it’s a wild ride of opposites attracting, with some traders betting on the chaos of volatile assets like stocks and cryptocurrencies, while others clutch onto risk-off assets like cash and gold. It’s like having your cake and eating it too, only you’re not sure if the cake is about to explode or turn into a giant sponge. 🍰💥

Year-to-date, we’ve seen record inflows into leveraged ETFs — you know, the ones that promise to turn your $1 into $3 if the market goes your way (or explode your $1 into a pile of confetti if it doesn’t). These are particularly popular with traders chasing the volatile chaos of assets like stocks and cryptocurrencies. Meanwhile, a completely different crowd has been flooding into funds holding the much safer bets, like cash and gold. It’s a bit like trying to play the stock market while wearing a suit of armor and sitting on a pile of gold coins. 🏰💰

“There’s basically record flows going into leveraged long ETFs but also cash and gold ETFs as people buy the dip and hedge the dip at the same time. May the best degen win!” said Bloomberg Intelligence analyst Eric Balchunas, because if you’re not gambling on both sides of the coin, are you even living? 🎲

Now, for those of you still scratching your heads wondering what exactly a “leveraged ETF” is, it’s a fund that aims to amplify the daily performance of assets like stocks or crypto, often by two or three times. Which is fine, until you remember that it could also amplify your losses by two or three times. You win some, you lose some, and sometimes you lose your shirt. But hey, that’s trading for you. 🧥💸

In 2025, leveraged long ETFs have seen net inflows of around $6 billion. Meanwhile, safe-as-houses cash and gold funds have lured in roughly $4 billion. That’s a lot of money being thrown around, like a couple of kids with too much pocket change and an unlimited supply of fireworks. 💥💵

Digital gold? Or just a shiny rock?

These record fund flows have come about amidst a huge spike in market turbulence, after none other than US President Donald Trump made a grand announcement on April 2, introducing sweeping tariffs on US imports. Because why not stir the pot a little more, right? Since then, the S&P 500 has lost about 5% of its value, which is, of course, what happens when you poke the market with a stick. 🦔

But wait! In the midst of this chaotic mess, Bitcoin (BTC) has remained somewhat resilient. Yes, that’s right, the world’s favorite digital coin has managed to rise above the chaos, reclaiming $90,000 per coin on April 22 for the first time in six weeks. In fact, Bitcoin ETFs have seen nearly $1 billion in net inflows. Who would’ve thought, right? It’s like watching a phoenix rise from the ashes, only with more memes. 🔥🐦

By April 23, Bitcoin had surged past $93,000. It’s almost as if the cryptocurrency market has its own little ‘everything’s fine’ sign blinking somewhere in the background while traditional risk assets go for a tumble. 📉

Binance, the world’s largest cryptocurrency exchange, issued a report in April saying, “Even in the wake of recent tariff announcements, BTC has shown some signs of resilience, holding steady or rebounding on days when traditional risk assets faltered.” Because Bitcoin is like that one guy at the party who doesn’t panic when everything goes wrong, but instead orders another round. 🍻

Bitcoin is often referred to as “digital gold,” which, to be honest, sounds cool, but in reality, its correlation with the precious metal is weaker than a cup of decaf coffee. Over the past 90 days, Bitcoin’s correlation with gold has been a mere 0.12. For comparison, its correlation with equities is 0.32. So, yeah, not exactly gold’s long-lost sibling. 🥴

The big question everyone’s asking: Will Bitcoin ever return to its long-term pattern of low correlation with equities? Who knows! It’s like asking if the moon landing was a good idea — we’ll have to wait and see. Meanwhile, gold is still the preferred safe-haven asset for most investors. They just don’t trust Bitcoin with their 401(k)s. 🏅

On the other hand, cryptocurrency exchanges are not just sitting back and relaxing — they’re profiting off of rising volatility by getting heavy into financial derivatives like futures. Because why not turn every volatile movement into another opportunity to sell something that might not exist in six months? 🤷‍♂️

In April, net open interest in Bitcoin futures increased by over 30%, reaching approximately $28 billion, according to Coinalyze. It’s like watching a high-stakes poker game, except with more blockchain and fewer face cards. 🃏

Read More

2025-04-24 01:51