JPMorgan reports that falling hedging demand for Bitcoin ETFs may provide stronger market support compared to gold, amidst shifting investor trends.
JPMorgan has indicated that the waning demand for hedging in Bitcoin exchange-traded funds (ETFs) could potentially bolster the cryptocurrency's performance more than gold, according to insights shared by The Block.
Following the Federal Reserve's late July meeting, both cryptocurrency and precious metal funds saw a notable influx of capital. This trend was initially associated with a renewed interest in the debasement trade strategy, but it lost momentum after the Fed's interest rate increase in September.
The bank's analysts attributed the shift in demand to rising yields on inflation-adjusted bonds and the unsuccessful attempt to pass the CLARITY Act legislation. They noted that while gold ETFs have experienced significant outflows this year, Bitcoin products have managed to recover about 50% of their earlier losses.
Despite a recent downturn in demand for crypto funds, analysts remain optimistic about a potential recovery if market conditions improve. Both gold and Bitcoin futures markets continue to show high positioning, reflecting strong institutional support for these assets.
JPMorgan also emphasized a critical difference in hedging practices between the two assets. Short interest in the BlackRock iShares Bitcoin Trust ETF (IBIT) is close to its highest levels this year, whereas the SPDR Gold Shares ETF (GLD) is currently below its historical averages. Furthermore, the ratio of open interest in put and call options for IBIT exceeds that of GLD.
According to JPMorgan, "This contrast indicates that Bitcoin is still facing greater market skepticism than gold, possibly due to higher demand for hedging, despite the recent influx of funds and the buildup of positions in the futures markets."
Additionally, a signal from CryptoQuant on September 14 suggested that Bitcoin may be emerging from a bearish trend.
