JP Morgan, in a research note shared with Cointelegraph on January 3rd, stated that the “debasement trade” involving gold and Bitcoin (BTC) is expected to continue due to ongoing geopolitical uncertainty. The bank noted that gold and BTC have become increasingly important components of investors’ portfolios as they seek to hedge against geopolitical risk and inflation. This trend is supported by the record capital inflow into the crypto markets in 2024.
The term “debasement trade” refers to the growing demand for gold and BTC driven by factors such as higher geopolitical uncertainty since 2022, persistent uncertainty about long-term inflation, and concerns about government deficits in major economies leading to “debt debasement,” among others, according to JPMorgan.
Investment managers, including Paul Tudor Jones, have been investing in Bitcoin and other commodities out of concerns that inflation is inevitable in the United States. Furthermore, US state governments are adding Bitcoin to their portfolios as a hedge against fiscal uncertainty, as stated by asset manager VanEck in December. In October, JPMorgan observed an increase in open interest on BTC futures, suggesting that funds view gold and Bitcoin as similar assets. Net open interest on BTC futures rose from around $18 billion in January to over $55 billion in December 2024, according to data from CoinGlass.
JPMorgan also noted in October that the resurgence of inflows into Bitcoin exchange-traded funds (ETFs) in September, following an outflow in August, suggests that retail investors may also view gold and Bitcoin in a similar manner. In November, US Bitcoin ETFs surpassed $100 billion in net assets for the first time, as reported by Bloomberg Intelligence. According to a report by Citi shared with Cointelegraph in December, crypto ETF inflows are an important metric to monitor as they indicate new funds and market participants entering the crypto space.
In December, asset manager Sygnum Bank stated that surging institutional inflows could create positive “demand shocks” for Bitcoin, potentially driving the price of BTC to new heights in 2025.