The First Spot Bitcoin ETF Is About to Shut Down. Here's What Crypto Investors Need to Know

The Hashdex Bitcoin ETF (NYSEMKT:DEFI) launched in 2022. It was the first Bitcoin (CRYPTO:BTC) futures ETF registered under the Securities Act of 1933.

On Aug. 4, Hashdex announced that it would be liquidating the fund. According to CoinDesk, the closure “may be the first liquidation of a U.S. spot bitcoin offering” in history.

Other Bitcoin-focused funds have closed before, including the VanEck Bitcoin Strategy ETF. But that fund closed once spot-market Bitcoin funds were approved. At the time, the VanEck Bitcoin Strategy ETF had just $69 million in assets under management, the bulk of which was expected to be moved to its new VanEck Bitcoin ETF (NYSEMKT:HODL), which was then allowed to own Bitcoin directly.

The Hashdex Bitcoin ETF, meanwhile, is liquidating with just $14.7 million in assets under management. That’s typically not enough to sustain an ETF’s long-term survival. So the shuttering of the fund is understandable from an business standpoint. But it’s also a sign of the times.

“Flows into the ETFs, which were first approved in January 2024, have dwindled as investors chased the better returns offered by AI-related investments,” observes CoinDesk. “Much of the market views the opportunity cost of holding BTC as too high while anything AI-related soars,” stressed another industry analyst.

There is no doubt that AI stocks have been posting extremely strong returns in recent years. But despite the recent correction, Bitcoin still holds massive long-term growth potential for one key reason.

Here’s why investors shouldn’t give up on Bitcoin

There are many reasons to still believe in Bitcoin’s long-term promise. But when it comes down to the catalysts that matter, one opportunity sticks out: Bitcoin’s ability to become the digital gold.

Gold prices have done very well in today’s world. Over the past five years, the price of gold has shot higher by more than 130%. The total market cap of gold now hovers around $29 trillion.

Image source: Getty Images

Bitcoin, meanwhile, is up just 44% in value over the last five years. Its total market cap is roughly $1.3 trillion. To match gold’s market cap, Bitcoin would need to rise more than 2,000%.

To be sure, Bitcoin also enjoys other growth catalysts, including institutional adoption and decentralized finance exposure. But the crypto asset’s comparison to gold is compelling on its own. While newer crypto assets may exceed Bitcoin’s technical features, they cannot become older than Bitcoin.

This, ultimately, is Bitcoin’s most durable competitive advantage. It has enduring name brand recognition because it was the first mass use case of crypto.

Most of gold’s value does not stem from industrial purposes, but from its accepted social value. Humans have been valuing gold for millennia. And while Bitcoin is significantly newer, no novel crypto asset will ever supplant its historical tenure.

Bitcoin’s history is already full of ups and downs. The price of Bitcoin today is roughly 47% lower than its all-time high set last October. Bitcoin, however, has plunged 70% to 80% in value in previous bear markets.

The point here isn’t that Bitcoin has more downside to go. Perhaps that is or isn’t true. The point is that Bitcoin is still a volatile, immature asset class. The liquidation of the Hashdex Bitcoin ETF is further evidence of that. But the long-term bull case remains intact, even if investors solely consider Bitcoin’s ability to compete directly with gold.

Ryan Vanzo has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.