Recently, an interesting phenomenon has emerged in the market, with outflows from gold ETFs while Bitcoin ETFs are experiencing inflows. Data shows that since the beginning of 2024, Bitcoin funds have seen inflows of up to $10.6 billion, while physical gold ETFs have experienced outflows of $7.6 billion.
The mainstream view in the market is that this indicates investors are shifting from gold to Bitcoin. In the latest research report, JPMorgan pointed out that this phenomenon does not necessarily indicate a transfer of funds.
The outflows from gold ETFs are mainly due to individual investors buying gold bars, while the growth of Bitcoin ETFs is primarily driven by investors transferring funds from their existing Bitcoin wallets.
<h2>Gold Accumulated Purchases Exceed Gold ETF Outflows</h2>
Since 2023, the outflows from gold ETFs have reached significant levels, but in fact, this outflow trend has been ongoing for four years.
This trend does not mean that individual investors are fleeing the gold market; instead, they are shifting from gold ETFs to directly purchasing gold bars and coins. Behind this trend is the disadvantage of gold ETF trading records and holdings in terms of privacy and anonymity, while physical assets like gold bars and coins offer better anonymity and can be held as tangible assets.
In fact, individual investors have not only not fled the gold market but have been increasing their investments.
Data shows that since the third quarter of 2020, individual and private investors' cumulative purchases of gold have reached $230 billion, a figure that not only exceeds the outflow of gold ETFs during the same period but also surpasses central banks' gold purchases.
<h2>Inflows of Bitcoin Investors into ETFs</h2>
On the Bitcoin ETF side, since its launch on January 10th, net inflows into spot Bitcoin ETFs have reached $9 billion. However, these inflows are not entirely new capital injections.
Most of the inflows actually come from private investors who originally held digital wallets through exchanges or retail brokers, as Bitcoin ETFs offer greater convenience and regulatory protection.
Therefore, the growth of Bitcoin ETFs cannot be directly seen as new capital entering the cryptocurrency market.
<h2>JPMorgan's Reminder: Don't Be Misled</h2>
Therefore, JPMorgan believes that it is misleading to infer market and investment directions solely based on ETF flows.
This expectation underestimates the gold purchases in the form of gold bars and coins by individual and private investors, while overestimating their Bitcoin purchases. In addition to individual and private investors, speculative institutional investors such as hedge funds and CTAs are also collectively driving this upward trend by purchasing gold and Bitcoin futures.
Especially since February, the buying activities of these institutional investors may be more active than retail investors. MicroStrategy has purchased over $1 billion worth of Bitcoin so far this year, and analysts believe that purchasing Bitcoin through debt financing has added leverage and bubbles to the current cryptocurrency frenzy, increasing the risk of more intense deleveraging in future potential downturns.

Relying solely on the flow of ETFs to infer market and investment directions can be misleading.

Investors are shifting from gold to Bitcoin? JPMorgan Chase: Those who love gold buy gold bars, those who love Bitcoin buy ETFs.