Capital rotation is evident, with gold and Bitcoin showing a "Zero-sum Game"?

JPMorgan believes that the remaining time this year will see this "Zero-sum Game" continue, and specific catalysts for Crypto Assets will create more upward space for Bitcoin in the second half.

Written by: Bu Shuqing

Source: Wall Street Journal

JPMorgan pointed out that as "de-dollarization transactions" have stalled, a "zero-sum game" situation has emerged between gold and Bitcoin. Since April 22, the price of gold has fallen nearly 8% after reaching a peak of $3500, while the price of Bitcoin has risen 18% during the same period.

This contrast is also reflected in the flow of funds. According to reports from the Chase trading desk, JPMorgan's latest report indicates that in the past three weeks, gold ETFs have seen outflows, while Bitcoin and Crypto Assets ETFs have attracted inflows.

JPMorgan Chase & Co. expects the "zero-sum game" between gold and Bitcoin to continue for the rest of the year, and tends to believe that crypto-specific catalysts will create more upside for Bitcoin in the second half of the year. The report notes that in addition to the financial support from gold outflows, Bitcoin has also benefited from a number of cryptocurrency-specific catalysts, including increased holdings by companies such as MicroStrategy and New Hampshire's passage of a bill allowing state finances to invest in Bitcoin.

Safe-Haven Assets Reversal

The report pointed out that in the fourth quarter of 2024, gold prices and Bitcoin prices had shown a trend of synchronized increase, especially during and after the U.S. elections, where market concerns over the depreciation of the dollar benefited both assets. However, entering 2025, this "de-dollarization" trade significantly stagnated, shifting to a "zero-sum game" relationship between gold prices and Bitcoin.

There are three main characteristics reflected in the flow of funds:

From the capital flows of physical gold and spot Bitcoin / Crypto Assets ETFs, gold has seen capital outflows in the past three weeks.

During the same period, Bitcoin / Crypto Assets ETFs recorded inflows.

Futures position data shows that gold futures positions continue to decline, while Bitcoin futures have seen a significant increase.

The rotation of funds is closely related to changes in the market environment. JPMorgan pointed out that the tariff tensions from mid-February to mid-April this year drove a strong rise in gold, while Bitcoin performed weakly along with risk assets. However, in the past three weeks, as market risk appetite improved, this trend has completely reversed.

This also indicates that, under specific market conditions, investors will rotate their allocations between these two types of safe-haven assets:

• During tariff tensions: gold rises, Bitcoin falls.
• During the period of improved risk appetite: gold pulls back, Bitcoin rises.

JPMorgan expects that the zero-sum game relationship between gold and Bitcoin will continue for the remainder of 2025, but due to the unique catalytic factors of crypto assets, Bitcoin may have greater upside potential than gold in the second half of the year.