JPMorgan has highlighted evidence of institutional demand for bitcoin and investors moving from gold exchange-traded funds (ETFs) to the cryptocurrency. The firm points out that bitcoin demand is driven not only by younger retail investors but also by institutional investors, such as family offices and asset managers.
Gold ETF Investors Moving to Bitcoin
JPMorganâ€™s Global Markets Strategy team released a report Friday that discusses bitcoin. It also compares the flow trajectories for Grayscale Bitcoin Trust (GBTC) and gold exchange-traded funds (ETFs). The report reads:
Paypal announced the launch of its cryptocurrency service, including bitcoin, on Oct. 21. The payments giant is currently rolling out the service to all U.S. users, with a plan to follow up with an international rollout and a similar product on its Venmo platform.
â€œIn our opinion, the ascend of Grayscale Bitcoin Trust suggests that bitcoin demand is not only driven by the younger cohorts of retail investors, i.e. millennials, but also institutional investors such as family offices and asset managers,â€ JPMorganâ€™s analysts explained in the report. They added that the demand for bitcoin â€œis particularly evident in the Grayscale Bitcoin Trust which saw a steepening of its cumulative flow trajectory in recent weeks.â€
The JPMorgan analysts proceeded to compare the October flow trajectory for Grayscale Bitcoin Trust and the equivalent flow trajectory for gold ETFs. They concluded:
JPMorgan explained last month that â€œthe potential long-term upside for bitcoin is considerable if it competes more intensely with gold as an â€˜alternativeâ€™ currency given that the market cap of bitcoin would have to rise 10 times from here to match the total private sector investment in gold via ETFs or bars and coins.â€
Grayscale currently has $9.1 billion in net assets under management across its 10 crypto investment products, $7.648 billion of which are in Grayscale Bitcoin Trust. The company added over $1 billion to its crypto products in Q3 2020, with the majority of the investment (81%) being from institutional investors, dominated by hedge funds.
Besides Paypal, other corporations that have endorsed bitcoin include NYSE-listed Square Inc. and Nasdaq-listed Microstrategy. The former recently allocated 1% of its total assets into bitcoin, while the latter invested $425 million in the cryptocurrency and made it the companyâ€™s primary Treasury reserve asset. Square also revealed that Cash Appâ€™s bitcoin revenue soared 1,000% to $1.63 billion in the third quarter, accounting for about 80% of the mobile payment platformâ€™s total revenue.
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