Since the listing of Bitcoin spot ETF in January this year, the product has attracted a large amount of capital inflow within just two months. Meanwhile, there has been a capital outflow from gold ETF during the same period, leading to a common interpretation that investors are shifting from gold to Bitcoin.
However, according to a recent research report by analysts at JPMorgan led by Nikolaos Panigirtzoglou, the situation is not as it seems. On the contrary, both retail and institutional investors have been buying gold and Bitcoin futures, driving the increase in these two commodities.
JPMorgan’s futures position index also suggests a sharp accumulation of gold and Bitcoin positions since February, totaling $7 billion in Bitcoin futures and $30 billion in gold futures. The analysts at JPMorgan stated, “Besides retail investors, speculative institutional investors such as hedge funds, including momentum traders like commodity trading advisors (CTAs), also seem to have been driving the market rise through their purchases of gold and Bitcoin futures since February, perhaps exerting even greater influence than retail investors.”
The analysts at JPMorgan pointed out that the outflow from gold ETF is not a new phenomenon caused by the launch of Bitcoin spot ETF this year. Instead, this phenomenon has been present for the past four years and started since the pandemic.
Furthermore, the analysts emphasized that gold ETF investors have not shifted to Bitcoin ETF. In fact, they have been buying more gold, but in the form of bars and coins instead. The analysts stated, “The outflow trend of gold ETFs does not reflect a dislike for gold from private investors such as individuals and family offices, but rather a shift in the form of holdings from physical gold ETFs to bars and coins. Privacy and tangibility have become more important for private investors since the pandemic, and in this regard, gold ETFs have a disadvantage compared to holding physical bars and coins.”
The analysts also pointed out that MicroStrategy’s recent large-scale purchases of Bitcoin have amplified the cryptocurrency market’s upward trend this year. The company has been continuously buying cryptocurrencies through the sale of convertible bonds, transforming itself into a leveraged bet on Bitcoin. The analysts at JPMorgan believe that this practice will bring more leverage and bubbles to the current cryptocurrency rally and increase the risk of deleveraging when the market eventually corrects.
