The Rise of Bitcoin, Gold as a Sacrifice?

The rise of cryptocurrencies in mainstream financial circles has come at the expense of gold, according to JPMorgan Chase & Co.

JPMorgan is one of the few Wall Street banks to predict a major shift in the gold and crypto markets. If investors shift even a small portion of their allocations from gold to cryptocurrencies, this trend will create problems for bulls in the precious metals market for years to come.

The Grayscale Bitcoin Trust has seen nearly $2 billion inflows since October, while gold's exchange-traded fund (ETF) has seen $7 billion in outflows, according to data.

Analysts at JPMorgan said that as digital currencies grow in popularity as an asset class, more people accept bitcoin as a reserve asset, which has a direct impact on gold, creating opportunities for institutions to allocate the two The foundation is laid for a major shift in assets.

Quantitative strategists including Nikolaos Panigirtzoglou believe that the claim that Bitcoin is digital gold is likely to lure investors away from gold, possibly even for years, resulting in a wide price difference between the two assets. big.

There is clear evidence that institutional use of Bitcoin is increasing. Institutional investors are flocking to bitcoin, likely putting downward pressure on gold in the longer term.

JPMorgan Chase & Co predicts major changes in the gold and cryptocurrency markets as digital currencies gain acceptance as an asset class.

In fact, the weakness of gold is not entirely suppressed by the rise of Bitcoin.

Gold's weakness is mainly reflected in the weakness of real yields, which have been negative recently. During the recent brief rise in nominal yields, real yields have barely changed, which keeps gold's bottom support still firm.

In addition to Bitcoin weakening the attractiveness of gold, countries around the world have suspended gold purchases in the past few months, which has also increased the loss of popularity of gold assets.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that gold continues to be bullish in the short term as a new round of stimulus projects in the United States gets closer.

Although, Bitcoin is coming in menacingly, overwhelming gold. However, the proportion of existing assets shows that the gold market is relatively stable.

According to statistics, Bitcoin accounts for only 0.18% of family office assets, while gold ETFs account for 3.3%. If investors switch their preferences from gold to Bitcoin, it will mean the transfer of billions of dollars in cash.

Family offices control about US$6 trillion in assets worldwide, while the asset management scale of gray bitcoin trusts is only slightly more than US$10 billion, which means that the share of bitcoin accounts for only 0.18% of family office assets.

However, the future momentum of Bitcoin is relatively strong.

On the other hand, Bitcoin has always been something for young people to play with. Whether you agree or not, the world is almost completely digitized today, so digital currency has also become the main safe-haven asset for young people to invest in.

This generation of young people has accepted Internet things since they were young, grew up in the Internet world, and also experienced the Great Depression once or twice. Gold is a strange thing to them, and young people may be less and less likely to choose to store money. Gold, by contrast, holds Bitcoin or a cool investment.

There’s no reason young people shouldn’t embrace Bitcoin, and as this generation takes over the workforce and the world’s wealth, the digital currency could become mainstream.

For example, many retailers that accept bitcoin are using Spend, an escrow service that partners with the Gemini cryptocurrency exchange to instantly convert bitcoin to fiat.

All in all, Bitcoin is popular among young people.

Therefore, based on the future, regardless of whether Bitcoin can overwhelm gold or whether gold can be as stable as Mount Tai, the "dispute" between the two will continue for a long time. Regardless of victory or defeat, gold has its own foundation built over the years, while Bitcoin is very popular among young people. Both have their own strengths to support, and the replacement will not happen so quickly.