Banking giant JPMorgan admits: Bitcoin’s growth is a risk for gold as an investment
- Bitcoin has strongly outperformed gold in recent months.
- Since the leading precious metal peaked last summer with new all-time highs of over $2,050, it suffered a correction of 10 percent, fell back and then consolidated in the $1,800 range.
- Bitcoin, on the other hand, has doubled since the summer, reaching a new all-time high of $19,900.
- According to JPMorgan, Bitcoin is likely to gain further traction, which could indeed be enormously bearish for gold. The idea behind this is that BTC could attract capital inflows as investors swap the precious metal for the leading crypto currency.
JPMorgan talks about „Bitcoin vs. Gold
According to JPMorgan analysts, there has already been an increase in capital flowing into Bitcoin Aussie, while capital is flowing out of gold.
The Grayscale Bitcoin Trust, for example, receives weekly inflows of tens of millions of dollars, while hedge funds sell their gold positions.
The bank’s analysts expect this trend to continue, as the institutional adoption of the crypto-currency has so far been limited due to a lack of regulatory clarity, infrastructure and brand power. The strategists write:
„Institutional adoption of Bitcoin by institutional investors has only just begun, while institutional adoption of Bitcoin by institutional investors is very advanced for gold“.
According to JPMorgan, approximately 0.18 percent of the total family office assets are currently allocated to Bitcoin or related investments. On the other hand, 3.3 per cent of family office assets are currently allocated to gold funds.
If these institutional investors begin to view Bitcoin as the superior store of value, gold could lose billions of dollars worth of investments while BTC gains the same amount.
BTC is an alternative to gold: Wall Street
A growing number of institutional investors are just beginning to recognise that Bitcoin is a viable alternative to gold.
Ray Dalio, the Co-CIO of Bridgewater Associates, one of the world’s largest investment funds, writes in a Reddit AMA
„It [Bitcoin] could therefore serve as a diversification vehicle for gold and other such assets. The main thing is that you have some of these types of assets (with limited supply, which are mobile and serve as asset repositories), including shares, in your portfolio and that you diversify among them. Not enough people do that“.
Others believe that Bitcoin is significantly better than gold as a hedge against inflation and other macroeconomic trends.
Paul Tudor Jones, for example, writes in his famous May investor letter that he considers Bitcoin to be the „fastest horse in the race“ in these unprecedented macroeconomic times. Tudor Jones refers, among other things, to Bitcoin’s ability to store assets deflationarily over time.