According to CoinDesk, in a recent research report, JPMorgan challenged the notion that investors are shifting their assets from gold to bitcoin (BTC) this year.
The report, spearheaded by Nikolaos Panigirtzoglou and his team, illustrates that both institutional investors and private individuals have concurrently amplified their stakes in gold and Bitcoin throughout the current year rather than transitioning their investments from one to the other.
This clarification comes in the wake of observations noting outflows from gold-based exchange-traded funds (ETFs) coinciding with a notable increase in inflows into Bitcoin ETFs, sparking speculation about a potential shift in investor preference from the traditional safe-haven asset to the digital currency.
Contrary to this speculation, the JPMorgan report asserts a simultaneous endorsement of both assets by investors.
The analysis points out a particular interest from speculative institutional investors, including hedge funds and momentum traders such as Commodity Trading Advisors (CTAs), whom it claims have been instrumental in propelling the rallies in both gold and Bitcoin futures starting inFebruary. Specifically, the analysis notes a sharp increase in investment, with Bitcoin futures witnessing a $7 billion position build-up and gold futures seeing a $30 billion increase.
However, the report cautions about the high risk of mean reversion for both assets. Mean reversion, a financial theory suggesting that asset prices and returns eventually move back towards their historical average, indicates that both gold and Bitcoin could potentially see a decrease in their values to align closer with their long-term averages. This cautionary stance is underscored by the current enthusiasm around these investments, which could lead to heightened volatility and correction phases if market sentiments shift.
The report also mentions the significant role played by MicroStrategy, a software development firm known for its aggressive Bitcoin acquisition strategy. The company has reportedly purchased over $1 billion worth of Bitcoin in 2023, adding to its substantial acquisitions from the last quarter of 2023. JPMorgan suggests that such large-scale, debt-funded purchases by MicroStrategy have not only amplified the rally in Bitcoin but also introduced additional leverage into the market. This, according to the bank, could potentially escalate the risk of a severe correction during a downturn, as the market might experience intensified deleveraging effects.
