Bitcoin Could Gain Traction Over Gold If ETF Hedging Eases

JPMorgan analysts have weighed in on the current market trends surrounding Bitcoin and gold. According to their report, if investors reduce their ETF hedges, Bitcoin could receive more support than gold.

The Federal Reserve meeting in late July triggered a surge in inflows for both Bitcoin and gold ETFs as part of what's known as the debasement trade. However, this trend has weakened over the past week due to rising inflation-adjusted bond yields and the Senate's failure to advance the Clarity Act.

The analysts noted that while gold ETF demand has recovered more than Bitcoin, institutional positioning in both assets remains high. The difference lies in ETF short interest, with BlackRock's iShares Bitcoin Trust ETF (IBIT) seeing a higher level of short interest compared to the SPDR Gold Shares ETF (GLD).

The put-to-call open interest ratio is also higher for IBIT than GLD, suggesting more hedging activity around Bitcoin. The analysts concluded that if hedging demand eases, this could create more support for Bitcoin over gold.