Bitcoin’s long-term investment case relative to gold has improved despite a period of market weakness, according to new reports from major Wall Street lenders, even as institutional outflows and fading regulatory momentum weigh on short-term sentiment.
Analysts at JPMorgan said Bitcoin now appears more attractive than gold on a risk-adjusted basis after a sharp divergence between the two assets over the past year.
The bank noted that gold significantly outperformed Bitcoin since October, while gold’s volatility climbed, narrowing the perceived risk gap between the traditional safe haven and the leading cryptocurrency.
JPMorgan quantitative strategist Nikolaos Panigirtzoglou said the combination of gold’s strong rally and rising volatility has “left Bitcoin looking even more attractive compared to gold over the long term.”
Divergence Reshapes the “Digital Gold” Narrative
The comments come after a period in which gold surged while Bitcoin struggled to maintain momentum.
Deutsche Bank analysts said gold rose more than 60% in 2025 amid central bank buying and safe-haven demand, while Bitcoin posted several monthly declines and underperformed many risk assets.
According to the Deutsche Bank analysts, the divergence has undermined BTC’s long-standing “digital gold” narrative, at least in the short term.
Since its peak in October 2025, Bitcoin has fallen more than 40%, marking four consecutive months of declines.
That is something not seen since before the pandemic. Unlike previous drawdowns tied to macro shocks, this downturn has occurred even as stocks and gold rebounded.
Still, Deutsche Bank described the current phase as a “reset rather than a collapse,” arguing the market is testing whether Bitcoin can mature beyond belief-driven rallies and regain support from institutional capital and clearer regulation.
Institutional Outflows and Regulatory Delays Weigh on Sentiment
Both banks pointed to institutional flows as a major factor behind the recent slide.
Deutsche Bank said U.S. spot Bitcoin ETFs recorded heavy redemptions since October, including more than $7 billion in November, roughly $2 billion in December, and over $3 billion in January.
As institutions cut exposure, trading volumes have thinned, making Bitcoin more susceptible to sharp swings. Sentiment indicators have also weakened.
The Crypto Fear & Greed Index has fallen toward “extreme fear,” while Deutsche Bank surveys show U.S. consumer adoption slipping to around 12% from 17% in mid-2025.
Crypto Fear and Greed Index (Source: Alternative.me)
Regulatory uncertainty has added to the pressure. Progress on the bipartisan Digital Asset Market CLARITY Act has stalled in Congress, reversing earlier gains in market stability and pushing Bitcoin’s 30-day volatility back above 40%.
JPMorgan also pointed to short-term headwinds across crypto markets, including broader weakness in risk assets.
Despite the negative sentiment, the bank said position liquidations were more modest than in previous downturns, suggesting the selloff has been more orderly.
Spot ETF outflows, however, remain a sign of widespread caution among both institutional and retail investors.
Bitcoin’s Production Cost Seen as a Soft Floor
JPMorgan added that Bitcoin is now trading well below its estimated production cost of around $87,000, a level that has historically acted as a soft price floor during downturns.
Meanwhile, Citi said Bitcoin is approaching key ETF cost-basis levels and nearing its pre-election price floor as inflows slow and market headwinds persist.
Even with the drawdown, Deutsche Bank noted that Bitcoin remains roughly 370% higher than it was in early 2023, indicating that much of the recent decline reflects the unwinding of speculative gains from the prior rally.
Risk-Adjusted Metrics Favor Bitcoin Over Gold
JPMorgan’s longer-term outlook is driven by changing volatility dynamics. The bank said the Bitcoin-to-gold volatility ratio has fallen to about 1.5, a record low, suggesting Bitcoin’s risk profile relative to gold is improving.
On a volatility-adjusted basis, JPMorgan estimates Bitcoin’s market capitalization would need to rise significantly—equivalent to a price near $266,000—to match the private sector’s investment allocation to gold.
While institutional flows and regulatory clarity remain key near-term drivers, the bank’s analysis suggests Bitcoin’s long-term positioning against gold may be strengthening, even as short-term conviction across the market continues to erode.
Source: https://coinpaper.com/14330/jp-morgan-says-bitcoin-looks-attractive-as-deutsche-bank-sees-market-reset
