J.P. Morgan is skeptical about the long-term growth of Bitcoin spot ETFs, arguing that their valuations compared to gold suggest limited potential for asset under management (AUM) expansion. According to analysts at the bank, Bitcoin ETFs, when considered as a substitute for gold and adjusted for volatility, have an implied “realistic size” of $62 billion over the next two to three years.
📉 JPMorgan Bearish On Bitcoin
JPMorgan’s outlook for Bitcoin spot ETFs is less optimistic than that of more bullish crypto analysts. Despite already attracting $9.3 billion in net flows since their launch two months ago, JPMorgan believes that investors are not adequately factoring in the risks associated with Bitcoin. The bank argues that the volatility of Bitcoin, which is approximately 3.7 times that of gold, makes it unrealistic to expect Bitcoin to match gold within investors’ portfolios in terms of notional amounts.
To calculate its estimated figure of $62 billion for Bitcoin ETFs, JPMorgan divided the total amount of gold currently held by investors ($3.3 trillion) by the volatility multiple of 3.7. This implies a price per coin of $45,000, significantly lower than Bitcoin’s current market price of $69,000. However, it should be noted that some funds invested in these ETFs may have come from a shift out of other Bitcoin-based investment vehicles and into the ETFs.
⚖️ Bitcoin VS Gold
Bitcoin and gold are often compared as investment vehicles due to their similar properties. Both assets lack intrinsic cash flows but are difficult to produce more of, making them attractive hedges against inflation. Larry Fink, CEO of BlackRock, has even referred to Bitcoin as “digital gold” when discussing Bitcoin ETFs and described investors’ interest in the asset as a “flight to quality.”
🔮 Hot Take: Limited Growth Potential for Bitcoin Spot ETFs
J.P. Morgan’s analysis suggests that the growth potential for Bitcoin spot ETFs may be limited in the long term based on their valuations compared to gold. While more bullish analysts project higher AUM for these ETFs, JPMorgan believes that investors are overestimating the share of their portfolios that Bitcoin will comprise. The bank highlights the risk and volatility associated with Bitcoin as factors that investors should consider when allocating across asset classes.
🔎 Key Takeaways:
– J.P. Morgan expects limited growth in Bitcoin spot ETFs’ AUM in the long term.
– The bank estimates a “realistic size” of $62 billion for Bitcoin ETFs over the next two to three years.
– JPMorgan argues that investors are not adequately accounting for the risk and volatility of Bitcoin.
– The comparison between Bitcoin and gold reveals differences in their valuations within investors’ portfolios.
– Despite their similarities, Bitcoin and gold serve as different hedges against inflation.
– JPMorgan’s analysis challenges the more optimistic projections of other crypto analysts regarding Bitcoin spot ETFs’ growth potential.
In conclusion, J.P. Morgan’s analysis suggests that the growth potential for Bitcoin spot ETFs may be limited in the long term based on their valuations compared to gold. The bank highlights the risk and volatility associated with Bitcoin as factors that investors should consider when allocating across asset classes. While more bullish analysts project higher AUM for these ETFs, JPMorgan believes that investors are overestimating the share of their portfolios that Bitcoin will comprise. This analysis challenges the more optimistic projections of other crypto analysts regarding Bitcoin spot ETFs’ growth potential.
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