Nikolaos Panigirtzoglou, an analyst at JP Morgan, the investment bank, said that gold could languish for years as Bitcoin’s popularity grows.
It has been reported that growing mainstream acceptance of Bitcoin (BTC) as a reserve asset is having a direct impact on gold, setting the stage for a major shift in institutional allocation between the two assets.
However, quantitative strategists believe that Bitcoin’s digital gold narrative will draw investors away from precious metals, possibly for years to come, leading to a large divergence in price between the two assets.
The bank said that Bitcoin only accounts for 0.18% of assets held at family offices, compared with 3.3% for gold exchange-traded funds. Using this data as a starting point, only a small reallocation from gold to BTC could lead to “structural headwinds” for bullion’s price.
The strategists said:
“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”
Looking beyond JPMorgan’s analysis, there is clear evidence that institutional uptake of Bitcoin is rising. Grayscale, a digital-asset manager, has recorded record inflows into its Bitcoin and Ethereum (ETH) trusts. Grayscale, Paypal, and Cash App are buying up more BTC than is being mined each day.
Likewise, CoinShares has also reported on the recent surge in crypto capital inflows.
Over just four weeks, Bitcoin products sucked in $1.4 billion. Gold, meanwhile, recorded record outflows of $9.2 billion.
The bank said that investors wishing to go along with the trend can purchase one unit of Grayscale’s Bitcoin Trust and sell three units of the SPDR Gold Shares trust.
Thus, the digital asset is likely overextended after the latest rally, as the strategists cite the possibility of strong selling pressure in the short term.