JPMorgan Says Bitcoin Will Slowly Eat Into Gold’s Market Share

Banking giant JPMorgan said that Bitcoin is making quick inroads in mainstream finance at the cost of gold. Since October 2020, the banking giant has spotted a trend wherein money has been going into Bitcoin funds as institutional players pour more money in the cryptocurrency market.

The Wall Street banking giant notes that this trend could be a problem for the bulls in the precious metals market even if investors are currently moving a small portion of their assets from gold to Bitcoin (BTC). The important thing is that investors have started realising Bitcoin as a Gold-alternative.

Since October 2020, the Grayscale Bitcoin Trust (GBTC) has seen inflows of more than $2 billion while there were $7 billion moving out of Gold ETFs during the same period of time. JPMorgan states that the Bitcoin allocation by family offices is only 0.18%, on the other hand, they hold around 3.3% on Gold ETFs. Thus, even a marginal transfer from Gold to Bitcoin would mean billions-of-dollars in cash transfer.

“If this medium to longer term thesis proves right, the price of gold would suffer from a structural flow headwind over the coming years,” wrote JPMorgan’s strategists.

This is not for the first time that JPMorgan has been stressing the money flow from Gold to Bitcoin. Last month, the banking giant had made a similar observation in the market.

But Morgan Stanley is not alone in its prediction of Gold money moving to Bitcoin. Recently, billionaire investor and founder of Bridgewater Associates Ray Dalio made a similar comment about BTC.

During a Reddit AMA session, Dalio said: “I think that bitcoin (and some other digital currencies) have over the last ten years established themselves as interesting gold-like asset alternatives, with similarities and differences to gold and other limited-supply, mobile (unlike real estate) storeholds of wealth. As far bitcoin relative to gold, I have a strong preference for holding those things which central banks are going to want to hold and exchange value in when they are trying to transact”.

On the other hand, Morgan Stanley’s chief investment strategist Ruchir Sharma also said that Bitcoin could challenge USD’s status quo as the world’s reserve currency. In an interview with Financial Times, the Morgan Stanley strategist said that USD is losing steam with massive money printing by the Fed this year. It is very much possible that Bitcoin could take up the mantle, he added.