JPMorgan’s Analysis Shows Institutional Investors Moving From Gold ETFs to Bitcoin

JPMorgan has highlighted evidence of institutional demand for bitcoin and investors moving from gold exchange-traded funds (ETFs) to the cryptocurrency. The firm points out that bitcoin demand is driven not only by younger retail investors but also by institutional investors, such as family offices and asset managers.

Gold ETF Investors Moving to Bitcoin

JPMorgan’s Global Markets Strategy team released a report Friday that discusses bitcoin. It also compares the flow trajectories for Grayscale Bitcoin Trust (GBTC) and gold exchange-traded funds (ETFs). The report reads:

Corporate endorsements of bitcoin and in particular the endorsement by Paypal a couple of weeks ago appear to have propagated further demand for bitcoin.

Paypal announced the launch of its cryptocurrency service, including bitcoin, on Oct. 21. The payments giant is currently rolling out the service to all U.S. users, with a plan to follow up with an international rollout and a similar product on its Venmo platform.

“In our opinion, the ascend of Grayscale Bitcoin Trust suggests that bitcoin demand is not only driven by the younger cohorts of retail investors, i.e. millennials, but also institutional investors such as family offices and asset managers,” JPMorgan’s analysts explained in the report. They added that the demand for bitcoin “is particularly evident in the Grayscale Bitcoin Trust which saw a steepening of its cumulative flow trajectory in recent weeks.”

The JPMorgan analysts proceeded to compare the October flow trajectory for Grayscale Bitcoin Trust and the equivalent flow trajectory for gold ETFs. They concluded:

This contrast lends support to the idea that some investors that previously invested in gold ETFs, such as family offices, may be looking at bitcoin as an alternative to gold.

JPMorgan explained last month that “the potential long-term upside for bitcoin is considerable if it competes more intensely with gold as an ‘alternative’ currency given that the market cap of bitcoin would have to rise 10 times from here to match the total private sector investment in gold via ETFs or bars and coins.”

Grayscale currently has $9.1 billion in net assets under management across its 10 crypto investment products, $7.648 billion of which are in Grayscale Bitcoin Trust. The company added over $1 billion to its crypto products in Q3 2020, with the majority of the investment (81%) being from institutional investors, dominated by hedge funds.

Besides Paypal, other corporations that have endorsed bitcoin include NYSE-listed Square Inc. and Nasdaq-listed Microstrategy. The former recently allocated 1% of its total assets into bitcoin, while the latter invested $425 million in the cryptocurrency and made it the company’s primary Treasury reserve asset. Square also revealed that Cash App’s bitcoin revenue soared 1,000% to $1.63 billion in the third quarter, accounting for about 80% of the mobile payment platform’s total revenue.

What do you think about investors dumping gold ETFs for bitcoin? Let us know in the comments section below.

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