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The flow of capital into the cryptocurrency market, led by bitcoin, has been substantial over the past year and prices have risen to record levels. One bitcoin, which cost around $ 3,400 in February, recently cost a record $ 20,000 to trade up to $ 18,300 last week.
Certainly, the price of gold has risen considerably during the year, but it has been on a downward trend for much longer. The price has fallen since August and highs of more than $ 2,000 an ounce, as many analysts referred to investors who wanted to buy insurance against inflation after central banks rushed with record stimulus measures against the pandemic. On Wednesday, the price of gold in the first half was at the level of 1,865.
However, strategists at JP Morgan, whose CEO Jamie Dimon made several bitter comments and called bitcoin “a declining fraud,” now as one of the few banks on Wall Street predicts that digital currencies will lead to a change in the asset market hitting precious metals.
In the coming years, according to strategists, the new asset class, which has often been compared to a digital version of gold’s role as inflation insurance, will continue to hold back on the wheels of the noble market.
“Acceptance of bitcoin by institutional investors has only just begun, while the role of gold in this context is well established,” write the strategists at JP Morgan.
As a comparison, Greyscale Bitcoin Trust is used, an exchange-traded fund that monitors the price of bitcoin and allows exposure to bitcoin without a stake in the digital asset.
The Grayscale Bitcoin Trust has received inflows of $ 2 billion since October. During the same period, net withdrawals from exchange-traded funds exposed to gold amounting to SEK 7 billion took place at the same time. At the same time, the equation emphasizes that the total market value of bitcoin is only 3 percent of gold. If that share were to increase to 5 percent, the price of bitcoin would rise to more than $ 30,000.
Now that more and more people are deciding not to take their hand off gold, if only up to a point, according to strategists, it will quickly be a few billion more that will be injected into bitcoin.
“If this scenario proves to be in line with reality in the medium and long term, the price of gold will fight the headwinds of structural changes in the coming years,” the report’s authors write.
However, in the short term, there is reason to believe in a continued slowdown after the mighty rush for bitcoin as the price of gold regains some dominance.
