JPMorgan – Bitcoin is Replacing Gold as Hedge Against Inflation
Bitcoin, the world’s biggest cryptocurrency, is replacing gold as a hedge against inflation, according to a report from JPMorgan. This has fueled the current increase in bitcoin’s value. The introduction of the Bitcoin Strategy ETF, which became the first ETF to reach $1 billion in assets under management (AUM) in less than a year, has caused a commotion in the cryptocurrency sector.
It has also drawn attention to gold exchange-traded funds (ETFs) and their decreasing trend over the previous six months. Investors at JPMorgan are increasingly selecting Bitcoin over gold as a hedge against inflation, according to an investor paper put out last week.
As the report said, “the re-emergence of inflation fears among investors has re-ignited interest in the use of bitcoin as an inflation hedge.” During this time span, investment in gold ETFs has decreased by more than $40.8 billion.
Furthermore, some of the best-performing gold exchange-traded funds (ETFs) have had their yearly return on investment drop by as much as 6 percent (ATI). According to statistics from gold.org, net withdrawals from gold-backed exchange-traded funds (ETFs) were around $830 million in September alone.
In contrast to America and Europe, where the majority of the outflows occurred, Asia had a net influx of $135 million. According to the ETF Database, the SPDR Gold Shares ETF, the iShares Gold Trust, and the SPDR Gold MiniShares Trust have all seen a 6 percent decrease thus far in 2018.
ProShares Ultra Gold, which is ranked ninth in terms of total AUM, has lost 15 percent so far this year. In contrast, Bitcoin-related products have seen a constant increase in inflows across all markets, including the stock market. To provide an example, during the week of October 15, Bitcoin received inflows totaling $69.6 million dollars.
During the previous seven months, bitcoin-backed goods received a total of $225 million, the largest in the industry. Currently, the total value of Bitcoin assets under control is $72.32 billion.
“There are preliminary hints that the earlier move away from gold towards Bitcoin, which occurred over much of Q4 2020 and the beginning of 2021, has begun to re-emerge in recent weeks,” according to JP Morgan’s report.
In terms of Return on Investment (ROI), Bitcoin has had a 90 percent increase this year, whilst gold has experienced a 7 percent decline in annual ROI. Ethereum has provided an even greater return on investment, with a 786.8 percent rate of return.
Gold ETF investors have reportedly been seized by fear of rising interest rates and inflation, leading to a wave of panic selling, according to reports. In addition to Bitcoin, they are apparently investing in cryptocurrency byproducts like as the ProShares Bitcoin ETF, which was established on October 18.
As a result of these reasons, Bitcoin’s return on investment (ROI) has increased, with its price surging above $67,000 on Wednesday. In a statement, CoinShares claimed that “the recent decision by the SEC to approve a futures-based ETF in the United States might spur more big inflows in the coming weeks, as US investors begin to increase holdings.”