According to analysts at JPMorgan Chase, increasing mainstream adoption of Bitcoin (BTC) as a reserve asset is having a significant effect on gold, setting the stage for a significant shift in institutional allocation between the two assets.
Quantitative strategists like Nikolaos Panigirtzoglou, claim that the Bitcoin’s digital gold story would drag buyers away from precious metals, perhaps for years to come, resulting in a significant price divergence between the two assets.
Bitcoin accounts for just 0.18% of assets invested in family offices, compared to 3.3% for gold exchange-traded funds, the bank added. Using this data as a starting point, only a slight reallocation from gold to BTC could lead to “structural headwinds” for bullion’s price.
In a note to clients that was obtained by Bloomberg, the strategists said: “The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”
Looking beyond the report by JPMorgan, there is clear proof that Bitcoin’s institutional adoption is growing. Grayscale, a manager of digital assets, has recorded record inflows through its trusts in Bitcoin and Ethereum (ETH). More BTC is bought than is mined every day via Grayscale, Paypal and Cash App.