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JPMorgan highlighted evidence of institutional demand for bitcoin and investors moving from gold-traded funds (ETFs) to cryptocurrency. The firm points out that bitcoin demand is driven not only by young retail investors, but also by institutional investors, such as family offices and asset managers.
Gold ETF investors switching to Bitcoin
JPMorgan’s Global Markets Strategy team released a report on bitcoin on Friday. It also compares the flow trajectories for Grayscale Bitcoin Trust (GBTC) and gold exchange-traded funds (ETF). The report reads:
The corporate approval of bitcoin and in particular the approval of Paypal a couple of weeks ago seem to have propagated further demand for bitcoin.
Paypal announced the launch of its cryptocurrency service, including bitcoin, on October 21. The payment giant is currently rolling out the service to all US users, with a plan to follow with an international launch and similar product on its Venmo platform.
“In our view, the rise of Grayscale Bitcoin Trust suggests that demand for bitcoin is not only driven by the younger cohorts of retail investors, namely millennials, but also by institutional investors such as family offices and asset managers,” they explained. JPMorgan analysts in the report. They added that the demand for bitcoin “is particularly evident in the Grayscale Bitcoin Trust which has seen a steepening of its cumulative flow trajectory in recent weeks.”
JPMorgan analysts proceeded to compare the October flow trajectory for Grayscale Bitcoin Trust and the equivalent flow trajectory for gold ETFs. They concluded:
This contrast supports the idea that some investors who had previously invested in gold ETFs, such as family offices, might see bitcoin as an alternative to gold.
JPMorgan explained last month that “the long-term upside potential for bitcoin is considerable if it competes more intensely with gold as an ‘alternative’ currency as bitcoin’s market cap is expected to rise 10x from here to match the industry. total private investment in gold through ETFs or bullion and coins “.
Grayscale currently has $ 9.1 billion in net assets under management through its 10 crypto investment products, including $ 7.648 billion in Grayscale Bitcoin Trust. The company added more than $ 1 billion to its crypto products in the third quarter of 2020, with the majority of investments (81%) coming from institutional investors, dominated by hedge funds.
In addition to Paypal, other companies that have approved bitcoin include NYSE-listed Square Inc. and Nasdaq-listed Microstrategy. The former recently allocated 1% of its total assets to bitcoin, while the latter invested $ 425 million in cryptocurrency and made it the company’s main treasury reserve asset. Square also revealed that Cash App’s bitcoin revenue increased 1,000% to $ 1.63 billion in the third quarter, accounting for about 80% of the mobile payment platform’s total revenue.
What do you think of investors downloading gold ETFs for bitcoin? Let us know in the comments section below.
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