Investors are selling Gold ETF
for cryptocurrency
19
November 2020
As
more and more people begin to understand cryptocurrency as profitable
investment outlets, many traditional investments may suffer huge withdrawals.
In
the report, which compared the “flow trajectories for Grayscale Bitcoin Trust
(GBTC) and gold Exchange-Traded Funds (ETFs)”, JPMorgan attributed the flight
to cryptocurrency to “corporate endorsements and the endorsement by Paypal, a
couple of weeks ago. The report then opined that the analysis “supports the
idea that some investors that previously invested in gold ETFs may be looking
at bitcoin as an alternative investment to gold.”Paypal endorsed cryptocurrency
by announcing the launch of its cryptocurrency service on October 21, while
other corporates like Square Incorporated and MicroStrategy also signaled their
endorsements by allocating some percentages of their assets to bitcoin. To be
exact, while Square Inc allocated 1% of its asset to bitcoin, MicroStrategy
invested $425 million in cryptocurrency.
That
scenario could be playing out amongst Nigerian investors too, as the popularity
of cryptocurrency increases in Nigeria. Analysis of the recently released
mutual funds NAV Summary Report conducted by Quantitative Financial Analytics
shows that investors withdrew a whopping N16.493 billion from the New Gold ETF,
leading to a 44% decrease in the Net Asset Value (NAV) of New Gold ETF as of
November 6th, 2020.
The
thinking was that the withdrawal was as a result of the improvements being
noticed in the Nigerian Stock Market, where stock prices have begun to regain
lost grounds and trading has peaked. It had been thought that the money
withdrawn from the ETFs made their way to the Nigerian Stock Market.However,
from the analysis conducted by JPMorgan, as noted above, it is not unlikely
that the money investors withdrew from New Gold ETF must have found its way
into bitcoins.
Is
Cryptocurrency a danger to other Asset types?
Those
investors making the switch must have thought it out properly because even
though New Gold Etf, the most volatile investment in the Nigerian mutual fund
industry, recorded an impressive performance in the first week of November
2020, when it generated an estimated N905 million in gain; it has been noted
that bitcoin revenue has been soaring in the range of 1000%. A return that can
lure even the most astute and conservative investor.As more and more people
begin to understand the cryptocurrency market and cryptocurrency as profitable
investment outlets, many traditional investment types and asset classes may
suffer huge withdrawals and erosion of net asset value. Investors are, however,
advised to exercise caution.
Source:
https://nairametrics.com/2020/11