- JPMorgan analysts identified the debasement trade as a lasting trend driven by inflation fears and geopolitical tensions.
- Gold prices rose beyond typical expectations due to the revival of the debasement trade, while record capital inflows into cryptocurrency markets in 2024 positioned Bitcoin as a core investment asset.
JPMorgan analysts have identified the “debasement trade” as a lasting trend, with gold and Bitcoin (BTC) increasingly becoming core components of investment portfolios.
The debasement trade is simple: it’s a strategy where you turn to assets like gold and Bitcoin as hedges against the depreciation of fiat currencies, considering factors such as rising government debt, geopolitical tensions, and inflation fears. It is gaining momentum as investors fear that inflation may rise again (that, and fears of more geopolitical instability).
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Bitcoin and Gold
In the report led by Nikolaos Panigirtzoglou, the analysts noted that gold prices over the past year have risen beyond what would typically be expected based on dollar and bond yield movements.
The report attributes this growth to the revival of the debasement trade while also underscoring 2024’s record-breaking capital inflows into cryptocurrency markets, putting Bitcoin as a significant asset in investor portfolios. Another boost for the crypto market includes recent moves by traditional financial institutions like Morgan Stanley, now allowing financial advisors to recommend Bitcoin ETFs to clients.
Analysts estimate a record US$78B (AU$125B) flowed into the sector, driven by US$27B (AU$43B) in net inflows to crypto funds (adjusted for shifts from centralised exchanges to spot bitcoin ETFs), US$14B (AU$22.4B) in CME futures investments, US$14B (AU$22.4B) raised by crypto venture funds, US$22B (AU$35.3B) in BTC purchases by MicroStrategy, and US$1B (AU$1.55B) spent by BTC miners.
MicroStrategy’s acquisitions accounted for 28% of the total inflows into the crypto market.
The analysts highlighted that most liquidations from the Mt. Gox and Genesis bankruptcies —as well as the German government’s bitcoin sales— have largely concluded, a sign of relief, yet cash payments from the FTX bankruptcy, anticipated by late 2024 or early 2025, could potentially be reinvested into cryptocurrencies, they noted.
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