J.P. Morgan: Investors in Gold ETFs Opt for Physical Gold Instead of Bitcoin ETF

J.P. Morgan: Investors in Gold ETFs Opt for Physical Gold Instead of Bitcoin ETF

J.P. Morgan: Investors in Gold ETFs Opt for Physical Gold Instead of Bitcoin ETF

Since the listing of Bitcoin spot ETF in January this year, the commodity has attracted a large inflow of funds within just two months. On the other hand, there has been a outflow of funds from the gold ETF during the same period. This has led to a common interpretation that investors are shifting from gold to Bitcoin.

However, according to a report by The Block, a team of analysts led by Nikolaos Panigirtzoglou from JPMorgan Chase, the situation is not as it seems. On the contrary, both retail and institutional investors have been purchasing gold and Bitcoin futures, which has driven the rise of both commodities.

JPMorgan Chase’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 Chase stated:

“In addition to retail investors, speculative institutional investors such as hedge funds, including momentum traders like commodity trading advisors (CTAs), also seem to have played a significant role in driving the market upwards through purchasing gold and Bitcoin futures since February, perhaps even more influential than retail investors.”

The analysts at JPMorgan Chase pointed out that the outflow of gold ETFs is not a new phenomenon caused by the introduction of Bitcoin spot ETFs this year. On the contrary, this phenomenon has been present in the past four years and started since the pandemic.

Furthermore, the analysts at JPMorgan Chase emphasized that the investors of gold ETFs have not shifted to Bitcoin ETFs. Instead, they have been purchasing more gold, but in the form of gold bars and coins. The analysts stated:

“The outflow trend of gold ETFs does not reflect a rejection of gold by private investors such as individuals and family offices, but rather a tool conversion from physical gold ETFs to gold bars and coins. Privacy and tangibility have become more important for private investors since the pandemic, and in this regard, gold ETFs have disadvantages compared to holding physical gold bars and coins.”

The analysts also pointed out that MicroStrategy’s recent large-scale Bitcoin purchases have amplified the momentum of the cryptocurrency market this year. The company has been continuously purchasing cryptocurrencies through the sale of convertible bonds, transforming itself into a leveraged bet on Bitcoin. The analysts at JPMorgan Chase believe that this practice will bring more leverage and bubbles to the current cryptocurrency rally, and increase the risk of deleveraging when a future downturn occurs.