JPMorgan Chase (JPM.US): If hedged, Bitcoin supports or surpasses gold

According to Woofun AI, JPMorgan Chase (JPM.US) proposed a key market assumption: if investors remove defensive positions such as put options and shorting while holding Bitcoin spot, the potential support obtained by a Bitcoin ETF may surpass that of gold.

This assertion does not predict that Bitcoin will replace gold as the mainstream asset allocation, but is based on a deep deconstruction of the differences in position structure and capital flow in the two asset ETF markets. The core premise is that investors choose to keep assets rather than sell them.

It is worth noting that the effectiveness of this view is highly dependent on changes in investor behavior patterns, that is, from simple risk aversion to more firm long-term holding confidence, which provides a new analytical perspective for understanding the dynamic relationship between current crypto assets and traditional safe-haven assets.

Following the Federal Reserve's July 28-29 meeting, so-called “devaluation transactions” have once again emerged in the market, where investors tend to hold assets with limited supply due to concerns about the decline in cash purchasing power due to inflation, rising public debt, or currency depreciation. “The Block” quoted a team of JPMorgan Chase (JPM.US) analysts led by Nikolaos Panigirzoglu as reporting that both Bitcoin ETFs and gold ETFs showed net inflows in this context, but this was more a reflection of the overall trend in August than a continuous influx of immediate capital.

According to data compiled by Woofun AI, SosoValue's weekly data revealed more complex details of capital flows: from July 31 to September 4, the total net inflow of these two types of ETFs was approximately US$4.23 billion.

However, the breakdown data showed significant volatility: the first statistics after the conference showed a net outflow of $61.53 million; in the week of August 14, the net outflow increased to $389.71 million, then demand weakened again; in the week of September 11, the net outflow further increased to $4627.3 million; in the latest statistics on September 16, the net outflow amount reached $586.27 million.

Although gold has traditionally played a safe-haven role in “devaluation transactions,” Bitcoin is increasingly appearing in such transactions, although its price fluctuates more widely. “The Block” reports on the overall net inflow situation, while SosoValue's data confirms the complexity and instability of Bitcoin's capital flows, indicating the repetition and uncertainty of market sentiment in the short term.

J.P. Morgan Chase's (JPM.US) analysis went further into the micro level of hedging mechanisms and position structures. Investors can limit potential losses in a variety of ways, including holding spot Bitcoin ETF shares, buying put options (which increase in value once the ETF price falls), or shorting ETF shares and related futures contracts. Take a simplified model: Let's say a fund holds $10 million worth of Bitcoin ETF shares while shorting $2 million worth of the same ETF shares. If the fund decides to close its short selling position, it must buy back these stocks. This buying can effectively support the ETF price even without increasing the original $10 million long position.

In contrast, the role of put options is more indirect: when investors reduce their hold on put options, market makers may adjust their hedging strategies, but this does not necessarily cause people to buy Bitcoin ETF shares, so the reduction in put option protection should not simply be viewed as a new demand for ETFs. J.P. Morgan Chase (JPM.US)'s comparison of IBIT (IBIT.US) and GLD (GLD.US) positions in March of this year provided an empirical basis for this analysis. BlackRock (BLK.US)'s iShares Bitcoin Trust Product IBIT (IBIT.US) shorting ratio is rising, while the shorting ratio of SPDR Gold ETF GLD (GLD.US) is declining.

At the same time, IBIT (IBIT.US) also has a higher ratio of open positions between put options and call options than GLD (GLD.US). Simply put, investors in Bitcoin ETFs seem to be taking more risk precautions than investors in the biggest gold ETFs. Although this data is not real-time, it reveals that when market sentiment improves, Bitcoin may need to hedge risks by reducing positions. The larger shorting scale and number of put options mean that when investors no longer take protective measures against the same downside risks, the market reaction may be more intense.

Macroenvironmental constraints and criteria for verifying conclusions form the final boundary of this argument. ETF positions are only part of the overall market situation. Even if US Treasury bond yields rise rapidly or the dollar strengthens, investors may reduce their risky asset holdings while first closing those protective positions. Because of this, the broader interest rate environment remains important. Bitcoin's past performance in the face of the Federal Reserve's rate hikes shows that it behaves differently in different austerity cycles: sometimes it is used as a scarcity hedge, while at other times it is more like a high-risk asset sensitive to liquidity conditions.

Just one day when the price of Bitcoin rises is not enough to answer related questions; a more persuasive judgment should be based on stable ETF demand, plus evidence that investors are reducing risk prevention measures. The data on the shorting ratio is lagging behind, and it is impossible to explain why each position was established. Only by combining this data with the ETF's capital flow, options trading situation, and macroeconomic situation can it play a greater role.

The total flow of ETFs doesn't fully reflect the real behavior of different investors — one fund may be attracting new capital, while another market may just have existing holders removing downside risk protection. Both situations seem very positive at first glance, but the level of investor confidence they convey is quite different. JPMorgan's (JPM.US) argument will only be more persuasive if Bitcoin ETF holdings remain strong while defensive positions are declining. This combination can show that investors are not just looking for a short-term price rebound, but are increasingly willing to hold these assets without much risk protection. This will be a critical time to verify whether Bitcoin is actually supported beyond gold.