JPMorgan admits Bitcoin’s growth represents a risk to gold as an investment
Bitcoin has strongly outperformed gold over the past few months.
Since the leading precious metal peaked this past summer at new all-time highs above $2,050, it has faced a 10 percent correction, dropping, then consolidating in the $1,800 region.
BTC, on the other hand, has doubled since the summer, pushing to new all-time highs at $19,900.
According to JPMorgan, Bitcoin is likely to continue gain traction, which may actually present a bear case for gold. The idea here is that BTC may see capital inflows as investors swap the precious metal for the leading cryptocurrency.
JPMorgan talks Bitcoin vs. gold
According to a Bloomberg report, JPMorgan analysts say that there has been an increase in capital flowing into Bitcoin while capital flows out of gold.
The Grayscale Bitcoin Trust, for instance, is receiving weekly inflows of dozens of millions of dollars, while hedge funds are selling their gold positions alongside central banks.
The analysts at the bank expect this trend to continue as thus far, institutional adoption of cryptocurrency has been limited due to a lack of regulatory clarity, infrastructure, and brand power:
“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced,” wrote the JPMorgan strategists.
Running the numbers, JPMorgan wrote that approximately 0.18 percent of all family office assets are currently allocated to Bitcoin or related investments. On the other hand, 3.3 percent of family office assets are currently allocated to gold funds.
If these institutional investors begin to see Bitcoin as the superior store of value, gold could lose billions of dollars worth of investment while BTC gains that same amount.
BTC is an alternative to gold: Wall Street
JPMorgan’s report comes as a growing number of institutional investors have acknowledged that Bitcoin is a viable alternative to gold.
Ray Dalio, the co-CIO of one of the world’s largest investment funds, Bridgewater Associates, recently said on Reddit:
“So it could serve as a diversifier to gold and other such store hold of wealth assets. The main thing is to have some of these type of assets (with limited supply, that are mobile, and that are storeholds of wealth), including stocks, in one’s portfolio and to diversify among them. Not enough people do that.”
Others have gone as far as to say that Bitcoin is decisively better than gold as a hedge against inflation and other macroeconomic trends.
Paul Tudor Jones, in a famous May investor letter, wrote that he thinks Bitcoin will be the “fastest horse in the race” in these unprecedented macroeconomic times. Tudor Jones referenced Bitcoin’s ability to store wealth over time as a result of its halvings and fixed supply, which disallows value stored in the asset from being inflated away.