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Bitcoin has plummeted because institutional investors have lost their interest in the currency, and they have instead started investing in gold. The JP Morgan report highlights the reasons for bitcoin prices going down and gold is shining more.
Amidst the slowdown seen in bitcoin prices in the last couple of days, the currency has once again hit the rocks with the statement by a JP Morgan analyst. In his report, he has mentioned that institutional investors are turning towards gold and shunting bitcoin for their investments.
Gold is shining bright for the large institutional investors, and they are dumping bitcoin, going the more traditional way. In its Tuesday note to the clients, JP Morgan suggested that institutional investors are going back to gold, reversing a major bullish cryptocurrency market action that drove bitcoin’s prices above $64,000 in April.
Over the past month, bitcoin futures markets saw the steepest and more sustained liquidation since the bitcoin ascent started last October. The bitcoin futures contracts in the Chicago Mercantile Exchange have witnessed their first biggest decline this year.
Bitcoin may bounce back in the long term
Despite revealing about the slowdown of bitcoin prices and the changing trend of gold being the part of investment than bitcoin, JP Morgan still maintains that bitcoin will hit the $1,40,000 mark in the long run. Momentum traders are still positive about the currency in the long term.
JP Morgan believes that it will be too early to characterise bitcoin as oversold. The American bank said that bitcoin futures and related products had also been affected by the digital asset drop in value.
In the report, the bank has also mentioned that based on the volatility of bitcoin to gold, the current value of bitcoin is one-fourth of $1,40,000 or $35,000.
At the beginning of the year, the bank said that Bitcoin can be a compelling alternative to gold and hit $1,46,000 over the long term.
Reason for bitcoin hitting hard
After carrying high hopes of the investors, the cryptocurrency which was once compared to gold has hit a hard rock due to the actions of the momentum traders. They, along with crypto funds, have a partial impact on the prices of bitcoin. Therefore, the key momentum indicator has turned negative from a short-term perspective. This might result in more traders selling off their assets.
This recent outflow from bitcoin funds has been accompanied by the inflows of the gold ETFs as compared to the last quarter of 2020, as per the research by the bank.
Young investors saw bitcoin as the new gold and saw it as a worthwhile investment compared to bullion, which has given the new name to Bitcoin as millennial gold. However, the current shift is driven by institutional investors. In the first quarter of 2021, the inflows began to slow down in bitcoin from the institutional investors. It then turned negative in the second quarter of this year. Hence, the prices plummeted.
The reason for this shift is, however, not known and unclear to JP Morgan.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
