JPMorgan analysts say bitcoin could gain more ground than gold if investors pull back their ETF hedges. Gold ETFs have already recovered all of their outflows from earlier this year, while bitcoin ETFs have clawed back only about half, and short interest in BlackRock's bitcoin ETF still sits near its yearly high.
Bitcoin could get more support than gold if investors reduce their ETF hedges, according to JPMorgan analysts led by Nikolaos Panigirtzoglou.
Bitcoin and gold ETFs saw inflows after the Federal Reserve meeting in late July, when the so-called debasement trade returned, the analysts said in a Wednesday report. However, that trade weakened over the past week as inflation-adjusted bond yields rose and the Senate failed to advance the Clarity Act.
Gold ETFs have now recovered all of the outflows from earlier this year, while bitcoin ETFs have recovered about half, the analysts noted. Bitcoin ETF demand has also cooled in recent days, which the analysts said leaves more room for a recovery if the news flow improves.
Short interest exposes the gap
Futures positioning in both gold and bitcoin remains high, suggesting institutional investors have supported both assets, the analysts said. Yet the bigger difference shows up in ETF short interest.
Short interest in BlackRock's IBIT ETF remains close to its highest level this year, the analysts noted. In comparison, short interest in the SPDR Gold Shares ETF, or GLD, sits below its historical average, they said. According to JPMorgan analysts: "more sceptical positioning backdrop than gold".
The analysts added that the put-to-call open interest ratio is also higher for IBIT than GLD, pointing to more hedging around bitcoin. If that hedging demand eases, they said, the elevated short interest in IBIT versus GLD could create more support for bitcoin relative to gold from here.
Source: The Block
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