Institutional investors and individuals have bought both gold and Bitcoin (BTC) this year, rather than switching between the two as some analysts have postulated, JPMorgan (JPM) said in a research note on Thursday.
Outflows from gold exchange-traded funds (ETFs) and a surge in Bitcoin ETF inflows increased the possibility of investors switching from the precious metal to cryptocurrency, the report said. The bank said it disagreed.
“Retail investors and individuals have been promoting both gold and Bitcoin since the beginning of the year, rather than switching from the former to the latter,” analysts led by Nikolaos Panigirtzoglou wrote.
“In addition to retail investors, speculative institutional investors such as hedge funds, including momentum traders like CTAs, also appear to have driven the rally by buying both gold and Bitcoin futures since February, perhaps more strongly than retail investors,” the authors wrote.
The bank’s analysis shows “strong position building since February of $7 billion in Bitcoin futures and $30 billion in gold futures.”
The risk of mean reversion appears to be high, the bank said, meaning both assets could revert to their average levels.
Software developer MicroStrategy (MSTR), whose corporate strategy is to buy Bitcoin, also helped fuel the rally, the bank said. According to the report, the company has purchased over $1 billion worth of Bitcoin this year, adding to the more than $1 billion acquired in the final quarter of 2023.
“We believe MicroStrategy’s debt-fueled Bitcoin purchases further add to the current crypto rally and increase the risk of greater deleveraging in a potential downturn in the future,” the report said.
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