Another very popular asset, gold, is the growing adoption of Bitcoin (BTC) by institutions. According to JPMorgan Chase, investors may reallocate money in favor of Bitcoin over the next few years.
Gold and Bitcoin regularly meet back-to-back. The comparisons are also recurrent. The queen of cryptocurrencies thus often inherits the qualifier digital gold or gold 2.0. These speeches do not leave institutional investors indifferent.
For analysts at JPMorgan Chase, this could translate into significant shifts within investor portfolios. Gold could even fall victim to Bitcoin's success over the next several years.
Bitcoin adoption is "just beginning"
“The adoption of Bitcoin by institutional investors is only just beginning, while for gold, its adoption by institutional investors is very advanced. If this medium to long term thesis is correct, the price of gold will suffer from a structural headwind in the years to come "the bank warns in a note.
For now, gold is still largely crushing Bitcoin. Among family offices, cryptocurrency only represents 0.18% of assets. For gold exchange-traded funds, this share reaches 3.3%. However, it could be in danger.
However, this forecast does not apply to the short term. Signs for Bitcoin's price hike are fading, the bank says. Gold, on the other hand, should regain its brilliance, analysts say.
For institutions, exposure to Bitcoin is likely to be through ETFs. The Grayscale Bitcoin Trust (GBTC) recorded strong development in 2020. It thus holds more than 500,000 bitcoins.
Volatility degrades performance against gold
Michael Sonnenshein, COO of Grayscale Investments, is also a supporter of the vision of Bitcoin as digital gold.
"I think they (Editor's note: institutional) understand today that buying Bitcoin and storing it in their wallet is a way to store value, while being protected against inflation, a bit like digital gold ( …) Much more adapted to the digital world in which we operate ”he declared recently.
The very high volatility of recent weeks could nevertheless constitute an obstacle for many investors. Bitcoin outperforms gold and the S&P 500 over 3 years, notes Wells Fargo. This advantage of Bitcoin is recent, however.
“Until just two months ago, three-year total returns were about the same for all three assets, only volatility was different,” the bank warns.