Gold Prices Will Suffer for Years Because of Bitcoin Says J.P. Morgan Strategist

Gold is going to lose a significant amount of ground to Bitcoin in the coming years, according to J.P. Morgan strategists. The firm points out that institutional investment in gold is way ahead of Bitcoin and has been for years, but that the wave of institutional investing in cryptocurrencies is quickly catching up and ready to up end the world’s most valuable precious metal.

Grayscale Bitcoin Trust Is Leading the Way

Since October, The Grayscale Bitcoin Trust has seen inflows of over $2 billion USD of investment into Bitcoin, while more than $7 billion USD is leaving exchange traded funds tied to the price of gold.

This is all pointing to a trend led by younger investors who will choose digital gold over the traditional precious metal. Of course, those younger investors are not yet amassing institutional wealth, but institutional investors have the capital they have because they are good at predicting the future, and they have the capital necessary to hedge against other investments. That’s what smart money does.

The Numbers Tell the Story

J.P. Morgan estimates that Bitcoin currently only accounts for 0.18% of accounts held by family offices compared to 3.3% of those same assets held in gold ETFs. This means there is plenty of room for Bitcoin’s value to run higher. The firm says in the future, institutional investors could be selling three shares of gold ETFs for every share of a Bitcoin ETF they buy. This would lead to a changing of the guard.

The Future Is Bright for Bitcoin, but There’s a Long Way to Go

Despite its overwhelmingly positive sentiment, J.P. Morgan notes that in the short term, Bitcoin’s price should actually drop. It makes sense to offer that projection because the price has more than tripled since the coronavirus pandemic began to spread across North America. It’s bound to cool off a little bit.

The good news is that in the long run, institutional investment will enter a second wave where a much bigger pool of investors with deeper pockets will begin to favour cryptocurrencies over precious metals, and that’s when the true value of Bitcoin will begin to reflect accurately in its market price.

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