The Growing Disparity Between Paper and Physical Gold Markets
The paper gold market, which includes derivatives like futures, options, and ETFs, is much larger than the physical gold market. Goldmoney estimates that the paper gold market could be at least ten times bigger than the physical market. Many gold contracts settle in cash, without requiring the delivery of physical gold. Gold ETFs, such as SPDR Gold Shares (GLD), hold about 1,000 tonnes of physical gold. These ETFs provide investors with exposure to gold without the need to own it physically.
Bitcoin ETFs and the Rise of Derivatives
A similar trend is occurring in the Bitcoin (BTC) market. Bitcoin ETFs, introduced in the U.S. earlier this year, now hold over 4% of the total Bitcoin supply. The use of Bitcoin derivatives, such as futures contracts, is also growing.
Paper BTC vs. Physical BTC
Glassnode reports that 28% of Bitcoin’s liquid supply is now traded through derivatives, compared to 18% at the start of the year. As the Bitcoin market matures, we may see even more Bitcoin traded through derivative contracts. This shift could mirror the paper gold market, where many investors prefer financial instruments over owning the actual asset.
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