Speculators And Retails Are Driving Latest Bitcoin Rally, Says JPMorgan

JPMorgan analysts remain bearish on Bitcoin’s near-term future, believing the asset’s current rally is attributable to retail and speculative institutions.

Both groups, the bank claimed on March 14, have joined momentum traders like commodity trading advisors in burrowing money into both gold and bitcoin futures.

JPMorgan’s Bitcoin Analysis

The bank’s analysis is a countertheory to those associating the massive success of Bitcoin spot ETFs with outflows from gold ETFs, believing investors are swapping funds from the latter to the former. Since the start of the year, over $5 billion has flowed out of gold ETFs, while almost $12 billion has flowed into Bitcoin ETFs.

JPMorgan CEO:I Wont Ever Personally Buy A Bitcoin

— *Walter Bloomberg (@DeItaone) March 11, 2024

“This [gold ETF] outflow trend does not reflect an aversion to gold by private investors such as individuals and family offices, but rather an instrument shift away from physical gold ETFs to bars and coins,” wrote analysts led by Nikolaos Panigirtzoglou in his report.

Bitcoin and gold are often compared for having similar investment theses: both are limited-supply commodities and potential hedges against inflation or financial catastrophe. Bitcoin bulls are quick to note that Bitcoin beats gold on monetary properties like scarcity and portability and predict a day will come when the former “eats” the latter.

The bank’s analysts, however, believe gold ETF buyers are simply escaping into actual gold for security reasons.

“Privacy and tangibility have become more important considerations for private investors since the pandemic, and physical gold ETFs have a disadvantage in this respect relative to holding bars and coins,” they wrote.

The bank added that real gold has been in higher demand than ETF gold since the pandemic, even outpacing gold purchases by central banks.

What Are The Real ETF Inflows?

While Bitcoin ETFs have been extremely successful, JPMorgan believes they are experiencing the reverse of gold: holders of actual BTC on crypto exchanges are selling their holdings to buy the ETFs instead.

This theory is corroborated by data showing $7 billion of outflows from crypto exchanges since the ETFs launched.

“In other words, it is more likely that the net flow from retail investors into the newly created ETFs is closer to $2 billion,” analysts claimed.

Though MicroStrategy (MSTR) continues to raise money to buy BTC, JPMorgan believes this is adding froth to the already hyped market, possibly resulting in an upcoming major correction.