Institutional investors are dumping bitcoin in favor of gold, reversing a recent trend that's played out over the last two quarters, according to a new report from JPMorgan. Based on open interest in CME bitcoin futures contracts, the firm said large investors are shifting away from bitcoin after favoring the digital currency over gold beginning last fall. "The bitcoin flow picture continues to deteriorate and is pointing to continued retrenchment by institutional investors," JPMorgan wrote in a note to clients. "Over the past month, bitcoin futures markets experienced their steepest and more sustained liquidation since the bitcoin ascent started last October." Bitcoin tumbled below $40,000 on Wednesday to trade as low as $30,001.51, a level not seen since January, according to data from Coin Metrics. On Tuesday, three Chinese banking and payment industry bodies warned institutions not to participate in crypto-related activities. At one point on Wednesday, bitcoin was down more than 20% over a 24-hour time period, according to data from Coinbase. Wednesday's price is a far cry from bitcoin's all-time high of $64,829.14, hit in mid-April. JPMorgan noted that some of the recent pressure is likely due to momentum traders, including crypto funds, letting up on their holdings. The firm noted that the momentum signal for bitcoin has dipped further towards negative territory for the first time since March 2020. Investors offloading their bitcoin positions coincides with inflows into gold exchange-traded funds, the firm noted. "This suggests that institutional investors appear to be shifting away from bitcoin and back into traditional gold reversing the trend of the previous two quarters," analysts led by Nikolaos Panigirtzoglou said. He noted the reasons for the shift are unclear, but speculated that it could be concerns over bitcoin's uptrend ending and gold's stability looking more attractive. Alternatively, the price of bitcoin could now simply be too high relative to gold, prompting the rotation away from crypto and into the precious metal. The firm's call comes as crypto bulls tout bitcoin's potential to act as a modern-day replacement for gold. "It's easily transportable and can be sent anywhere in the world if you have a smart phone, so it's a much better version, as a store of value, than gold," Miller Value Partners founder and chief investment officerb Bill Miller told CNBC in April . Despite bitcoin's recent weakness, JPMorgan said it's too early to call bitcoin oversold. Looking at the crypto's longer-term trajectory, the firm said the momentum signal is "still in pretty positive territory." —CNBC's Michael Bloom contributed reporting.
