JPMorgan says ‘debasement trade’ is here to stay as bitcoin and gold gain structural importance
2025-01-05
Category: None

JPMorgan analysts said the "debasement trade" is far from a passing trend, with both gold and bitcoin gaining structural importance in investor portfolios.
"The gold price appreciation over the past year has gone well beyond the moves implied by dollar and real bond yield shifts, and likely reflects the re-emergence of this 'debasement trade,'" JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report on Friday. Meanwhile, a record capital inflow into crypto markets in 2024 suggests that bitcoin is also becoming "a more important component" of investors' portfolios, they added.
The debasement trade refers to a strategy where investors turn to assets like gold and bitcoin to hedge against the devaluation of fiat currencies, often driven by factors such as inflation, rising government debt and geopolitical instability.
The structural rise of gold in investor portfolios is evident when examining the amount of gold held for investment purposes by central banks and private investors, according to the analysts. This includes physical gold, gold ETFs and other investment vehicles, which now account for a significant percentage of the total assets held by non-bank investors globally.
Bitcoin, too, is becoming an increasingly important part of investor portfolios. JPMorgan analysts called 2024 "a pivotal year" for the crypto market, estimating that a record $78 billion flowed into the space. This included a $27 billion net inflow into crypto funds (adjusted down by $17 billion to reflect the shift from crypto wallets on centralized exchanges to more cost-effective and liquid spot bitcoin ETFs), $14 billion invested in CME futures, $14 billion raised by crypto venture capital funds, $22 billion in bitcoin purchases by MicroStrategy and $1 billion in purchases by bitcoin miners.
The analysts noted that MicroStrategy's bitcoin purchases alone accounted for 28% of the total capital inflow into the crypto market in 2024.
Overall, with both gold and bitcoin gaining structural importance, the debasement trade is here to stay, according to the analysts. Last October, the analysts expressed bullishness on crypto heading into 2025, citing factors such as the debasement trade and growing institutional adoption, among others.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2024 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.