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J.P. Morgan analysis shows that institutional investors have switched from gold ETFs to Bitcoin

JPMorgan Chase highlighted evidence of institutional demand for Bitcoin and evidence of investors switching from gold exchange-traded funds (ETFs) to cryptocurrencies. The company noted that demand for Bitcoin is not only driven by young retail investors, but also by institutional investors (such as family offices and asset management companies).

Gold ETF investors turn to Bitcoin

JPMorgan Chase’s global market strategy team released a report on Friday discussing Bitcoin. It also compares the flow trajectories of Grayscale Bitcoin Trust (GBTC) and Gold Exchange Traded Funds (ETF). The report shows:

The company’s recognition of Bitcoin, especially the recognition of PayPal a few weeks ago, seems to have spread further demand for Bitcoin.

Paypal announced the launch of cryptocurrency services including Bitcoin on October 21. The payment giant is currently launching the service to all US users and plans to promote internationally and launch similar products on its Venmo platform.

JPMorgan Chase analysts explained in the report: “We believe that the rise of Grayscale Bitcoin Trust shows that Bitcoin demand is not only driven by young retail investors (ie millennials), but also by institutional investors. (Such as family offices and asset management companies).” They added that the demand for Bitcoin “is particularly evident in the Grayscale Bitcoin Trust Fund, which has a steep cumulative flow trajectory in recent weeks.”

JPMorgan analysts continued to compare the October liquidity trajectory of the Grayscale Bitcoin Trust with the equivalent liquidity trajectory of the gold ETF. They concluded:

This comparison supports the idea that some investors who previously invested in gold ETFs (such as family offices) may be considering Bitcoin as an alternative to gold.

JPMorgan Chase explained last month: “If Bitcoin’s market value must rise 10 times from then to match the total size of the private sector, then if there is more fierce competition with gold as an “alternative” currency, Bitcoin’s potential long-term upside It’s huge. Invest in gold through ETFs or gold bars and coins.”

Grayscale currently manages US$9.1 billion in net assets in its 10 crypto investment products, of which US$7.648 billion belongs to Grayscale Bitcoin Trust. The company added more than $1 billion in funding for its crypto products in the third quarter of 2020, with most of its investment (81%) coming from institutional investors led by hedge funds.

In addition to Paypal, other companies that recognize Bitcoin include Square, which is listed on the New York Stock Exchange and Microstrategy, which is listed on NASDAQ. The former recently allocated 1% of its total assets to Bitcoin, while the latter invested $425 million in the cryptocurrency and made it the company’s main treasury reserve asset. Square also revealed that Cash App’s Bitcoin revenue soared by 1,000% in the third quarter, reaching $1.63 billion, accounting for approximately 80% of the total revenue of the mobile payment platform.

What do you think of investors selling gold ETFs to obtain Bitcoin? Let us know in the comments section below.

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