[NEW] JP Morgan analyzes that inflows into Bitcoin spot ETF "are not from gold investors"

Since the Bitcoin spot ETF was approved by the SEC and listed in January, it has seen a large inflow of funds.

According to JP Morgan analysts, the recent price surge in Bitcoin and other cryptocurrencies is not due to investors shifting from gold to Bitcoin. They argue that it is mainly caused by retail investors and speculative institutional investors buying both gold and Bitcoin. This is contrary to the common interpretation that investors are shifting their investments from gold to Bitcoin.

In its report, JP Morgan said, "We do not agree with the theory that funds are being transferred from gold to Bitcoin. Rather, we believe that private investors and individuals are acquiring both gold and Bitcoin."

JP Morgan analysts say that they are beginning to value the "convenience and regulatory protection of Bitcoin spot ETFs" because retail investors hold Bitcoin directly in their wallets. The idea is that it is safer to hold Bitcoin spot ETFs than to manage Bitcoin yourself in your wallet.

The report analyzed that "Prices appear to be rising as speculative institutional investors such as hedge funds, including momentum traders such as CTAs (commodity trading advisors), have purchased both gold and Bitcoin futures in larger quantities than individual investors since February."

The analysts also pointed out that JP Morgan's futures position indicator suggests a "rapid position buildup since February," with $7 billion in Bitcoin futures and $30 billion in gold futures. They believe this is mainly due to momentum traders.

The analysts also pointed out that outflows from gold spot ETFs were observed even before Bitcoin spot ETFs began trading. They added, "This has been happening for the past four years since the COVID-19 pandemic."

Furthermore, they said that gold spot ETF investors have not shifted to Bitcoin spot ETFs, but rather "reflect a shift in financial products from gold spot ETFs to bullion and coins."

The reason given was that "privacy and accessibility have become important considerations for retail investors since the pandemic, and physical gold ETFs are at a disadvantage in this respect compared to holding bars and coins," the analysts said.

These retail investors have avoided physical gold ETFs, but have been buying gold bars and coins "in a fairly strong and steady way since the pandemic," and have outpaced central banks in terms of volume, the analysts added.

Reference: Report
Image: Shutterstock

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