Gold VS Bitcoin – A "zero-sum game" has formed

In the first half of this year, the market witnessed a remarkable asset reallocation process: gold and Bitcoin, which were originally expected to rise simultaneously in the fourth quarter of 2024, have now evolved into a "zero-sum game."

According to news from the Chase trading desk, JP Morgan wrote in a research report this week that since gold prices peaked at $3,500 on April 22, they have fallen nearly 8%, while Bitcoin prices have risen 18% during the same period. This pattern of mutual rise and fall is expected to continue until the end of the year, but several positive catalysts unique to cryptocurrencies may allow Bitcoin to outperform gold in the second half.

Capital flows confirm the "seesaw" effect between gold and Bitcoin

JP Morgan stated that the asset flow data from the past three weeks clearly demonstrates this mutual rise and fall relationship.

The behavior of retail and private investors shows that there has been an outflow of funds from physical gold and spot ETFs, while Bitcoin/cryptocurrency ETFs have experienced inflows. The futures market also shows a similar trend: gold futures continue to decline, while Bitcoin futures have surged. This is in contrast to the tariff events from mid-February to mid-April this year, when gold rose strongly while Bitcoin and risk assets fell in tandem.

In this regard, JP Morgan analyzed that before and after the U.S. presidential election in the fourth quarter of 2024, gold and Bitcoin rose simultaneously, exhibiting a common characteristic of "currency depreciation trades." However, entering 2025, this synergy has stagnated and transformed into a zero-sum game between the two.

From mid-February to mid-April, the rise in gold came at the expense of Bitcoin's decline; whereas in the past three weeks, the opposite trend has emerged—Bitcoin has risen while gold has fallen.

"Unique" multiple catalysts support Bitcoin's upward momentum

JP Morgan believes that Bitcoin's performance in the second half of this year will outperform gold, and they suggest that in addition to benefiting from gold's decline, Bitcoin is also supported by several positive factors unique to cryptocurrencies:

1. Trend of corporate accumulation

Companies like MicroStrategy and Metaplanet are actively increasing their Bitcoin holdings. MicroStrategy announced plans to raise $42 billion (a total of $84 billion) by 2027 to purchase Bitcoin, with its initial $42 billion "21/21" plan already 60% complete.

2. Investment entry by U.S. state governments New Hampshire has become the first state in the United States to pass a bill allowing state finances to invest in the cryptocurrency market, authorizing up to 5% of state assets to be invested in Bitcoin and gold. Arizona has also adopted a budget-neutral approach to establish a reserve fund for Bitcoin and other digital assets. As more U.S. states may consider adding Bitcoin to their strategic reserves, this could become a continued positive factor for Bitcoin.

3. Maturation of the Derivatives Market

U.S. cryptocurrency exchanges are acquiring crypto derivatives platforms, such as Coinbase acquiring Deribit, which accounts for 85% of global crypto options trading, Kraken acquiring the U.S. futures platform Ninja Trader, and Gemini obtaining a MiFID II license to offer derivatives in the Eurozone. This indicates that the crypto derivatives market is maturing and may enhance the confidence and participation of traditional institutional investors through incorporation into U.S. or EU regulations