The combination of year-to-date outflows from gold exchange-traded funds (ETFs) and significant inflows into Bitcoin ETFs is raising questions about whether investors are diverting their funds from the bullion to the world’s largest cryptocurrency.
Driven by strong interest in spot Bitcoin ETFs, BTC funds experienced an inflow of $10.6 billion so far this year, compared to a $7.6 billion in outflows for physical gold ETFs.
However, JPMorgan strategists believe this is not the case where investors are shifting funds from gold to Bitcoin.
“We disagree and instead believe that private investors and individuals have propagated both gold and bitcoin YTD rather than shifting from the former to the latter,” analysts said in a note.
Analyzing ETF flows alone may offer a misleading perspective, potentially underestimating the acquisition of gold by individuals and private investors through bars and coins, while overestimating their investment in Bitcoin.
JPMorgan strategists highlighted a notable trend where retail investors are transitioning from holding Bitcoins in digital wallets “to the convenience and regulatory protection of the new spot bitcoin ETFs.”
“Beyond retail investors, speculative institutional investors such as hedge funds, including momentum traders such as CTAs, appear to have also propagated the rally by buying both gold and bitcoin futures since February, perhaps even more heavily than retail investors,” analysts wrote.