Institutional investors, such as family offices, might be looking at bitcoin as an alternative to gold, according to JPMorgan analysts.
In a research note published Friday, JPMorgan analysts said Grayscale's bitcoin trust saw cumulative inflows through October, whereas gold exchange-traded funds (ETFs) saw "modest outflows" since mid-October. "This contrast lends support to the idea that some investors that previously invested in gold ETFs such as family offices, may be looking at bitcoin as an alternative to gold," said the analysts.
Both retail and institutional investors are driving demand for Grayscale's bitcoin trust, according to the analysts. The trust currently manages $7.6 billion worth of assets in total.
The potential long-term upside for bitcoin is "considerable" if it competes "more intensely with gold as an 'alternative' currency,'" according to the analysts. However, bitcoin's market cap would have to rise ten times from current levels "to match the total private sector investment in gold ETFs or bars and coins," said the analysts.
Corporate endorsements of bitcoin in general and PayPal's support, in particular, have also propelled the demand for bitcoin, according to the analysts. Bitcoin, however, appears to be "close to overbought levels on our momentum signal framework, something that could potential[ly] trigger profit taking or mean reversion flows," said the analysts.