Bitcoin adoption is coming at the expense of gold: JPMorgan

Bitcoin adoption is coming at the expense of gold: JPMorgan

By Hassan Maishera - min read
An image of Bitcoin and Gold

JPMorgan believes that the growing Bitcoin (BTC) adoption is affecting gold prices  

JPMorgan strategists believe that Bitcoin’s rise is hurting the gold market, and the trend could continue for years to come as institutional investors pour money into the cryptocurrency space.

Nikolaos Panigirtzoglou, a strategist at JPMorgan, told Bloomberg that there had been a decline in funds invested into gold exchange-traded funds (ETFs) since October. It comes at a time when institutional funds into Bitcoin and other cryptocurrencies have swelled. The strategists added that the move represents the transfer of billions from the gold market to the BTC market.

The strategists wrote that “The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced”. If this trend keeps increasing, then it would be at the expense of gold, and its price would suffer from a structural headwind over the coming years.

JPMorgan is one of the few investment banks predicting significant changes in the crypto and gold markets as cryptocurrencies become more popular as an asset class. To highlight their point, the strategists looked at the performance of the Grayscale Bitcoin Trust. The publicly listed security is popular with institutional investors and has received nearly $2 billion since October. In comparison, exchange-traded funds (ETFs) backed by gold have seen an outflow of $7 billion during that period.

According to JPMorgan’s calculations, Bitcoin currently accounts for roughly 0.18% of family office assets, while gold ETFs account for 3.3%. Families switching their assets from gold to Bitcoin would represent the transfer of billions of dollars.

Wall Street financial experts had previously discredit Bitcoin, but most of them have either started to rescind their past opinions or are already investing in the new asset class. Famous investors like Stan Druckenmiller, Paul Tudor Jones and Wall Street giant Guggenheim Partners have allocated part of their investments to Bitcoin.

Bitcoin’s price has been struggling since it hit the all-time high a few days ago. JPMorgan thinks that in the short-term, it is likely that BTC price has overshot while that of gold is due for recovery. The strategists added that Bitcoin has lost momentum and could result in some selling pressure in the short-term.