Key Points
- The recent bitcoin surge is driven by retail and speculative institutional investors, not a shift from gold to bitcoin, say JPMorgan analysts.
- Investors are buying both gold and bitcoin futures, leading to the rally.
Analysts at JPMorgan have suggested that the recent upswing in the value of bitcoin and the wider cryptocurrency market is primarily down to retail and speculative institutional investors.
These investors are purchasing both gold and bitcoin futures, rather than shifting their investments from gold to bitcoin.
Spot Bitcoin ETFs and Gold ETFs
Since the introduction of spot bitcoin exchange-traded funds (ETFs) earlier this year, there has been a significant influx of capital. Meanwhile, gold ETFs have seen outflows.
This has led to the interpretation that investors are moving from gold to bitcoin. However, JPMorgan analysts, led by Nikolaos Panigirtzoglou, suggest this is not the case.
They argue that both retail and institutional investors are buying both gold and bitcoin futures, which is causing the rally.
Speculative institutional investors, such as hedge funds and momentum traders, have also been contributing to the rally by purchasing both gold and bitcoin futures since February.
Gold ETF Outflows
The JPMorgan analysts also noted that the outflows from gold ETFs are not a new trend that has emerged due to the introduction of spot bitcoin ETFs.
This trend has been ongoing for the past four years since the pandemic.
The analysts suggest that gold ETF investors are not shifting to bitcoin ETFs. Instead, they are buying more gold in the form of bars and coins.
This trend reflects a shift away from physical gold ETFs to bars and coins, driven by considerations of privacy and tangibility.
Despite avoiding gold ETFs, private investors have been buying gold bars and coins steadily since the pandemic.
In terms of spot bitcoin ETF inflows, the analysts suggest that this is primarily a rotational capital shift from existing cryptocurrency venues such as crypto exchanges.
MicroStrategy's Bitcoin Holdings
The analysts also noted that the recent large-scale bitcoin purchases by MicroStrategy have amplified this year's crypto rally.
The company, led by Michael Saylor, appears to be transforming itself into a leveraged bet on bitcoin by purchasing the cryptocurrency through the sale of convertible notes.
The analysts believe that this approach is risky and adds leverage to the current crypto rally. They suggest it increases the risk of more severe deleveraging in a potential downturn in the future.
