JPMorgan Highlights Declining Interest in Gold and Bitcoin as Hedges

JPMorgan analysts have observed a significant reduction in investor interest in gold and Bitcoin as hedging assets, with substantial outflows from both Bitcoin ETFs and gold-related funds. From June 1 to June 5, precious metal exchange-traded products experienced a loss of around $20 billion, while Bitcoin has seen outflows for four consecutive weeks, with an accelerating rate of withdrawals.

The bank commented, “We are witnessing a broad retreat from this strategy among both retail and institutional investors. The trend has continued for gold and accelerated for Bitcoin in recent weeks.” Hedge strategies, as defined by JPMorgan, involve seeking alternative assets to safeguard against fiat currency devaluation.

Interest in gold has been waning since late February, and Bitcoin's decline began in early May, following a temporary rise due to geopolitical tensions in the Middle East. Furthermore, JPMorgan has noted a drop in the allocation of non-bank investors towards gold and Bitcoin compared to stocks, bonds, and cash, marking a significant decrease after a steady rise that began in mid-2022.

Interestingly, the correlation between Bitcoin and the real yield of 10-year U.S. Treasury bonds has recently turned negative, mirroring a similar trend for gold earlier in the year. Conversely, gold's relationship with the S&P 500 has become positive, suggesting that both assets are now behaving more like risk assets. Despite the current weak market sentiment, JPMorgan indicated that this could potentially lead to a "bullish countertrend signal." Additionally, Bitwise reported a notable shift in interest from Bitcoin towards stablecoins and tokenized assets among financial consultants.