Gold Investors Aren’t Switching Into Bitcoin, JPMorgan Says

• JPM said retail and institutional investors have been buying both gold and bitcoin this year.

• The bank’s analysis shows a build-up in gold and bitcoin futures since February.

• MicroStrategy’s bitcoin accumulation amplified the cryptocurrency’s rally.

Institutional investors and individuals have been buying both gold and bitcoin (BTC) this year, not switching between the two, as some analysts have postulated, JPMorgan (JPM) said in a research report on Thursday.

Outflows from gold exchange-traded funds (ETFs) and a surge in bitcoin ETF inflows raised the possibility that investors were shifting from the precious metal into the cryptocurrency, the report said. The bank said it disagreed.

“Private investors and individuals have propagated both gold and bitcoin year-to-date rather than shifting from the former to the latter,” analysts led by Nikolaos Panigirtzoglou wrote.

“Beyond retail investors, speculative institutional investors such as hedge funds including momentum traders such as CTAs appear to have also propagated the rally by buying both gold and bitcoin futures since February, perhaps more heavily than retail investors,” the authors wrote.

The bank’s analysis shows a “sharp position build-up since February of $7b in bitcoin futures and $30b in gold futures.”

The risk of mean reversion looks high, the bank said, which means both assets could fall back toward their average levels.

Software developer MicroStrategy (MSTR), which has a corporate strategy of buying bitcoin, also played a part in amplifying the rally, the bank said. The company has bought over $1 billion of bitcoin this year, adding to the more than $1 billion acquired in the last quarter of 2023, the report noted.

“We believe the debt-funded bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and raise the risk of more severe deleveraging in a potential downturn in the future,” the report said.