Originally published on: October 03, 2024
Investors are seeking refuge in gold and Bitcoin as they prepare for a looming “catastrophic scenario” amidst escalating geopolitical tensions and the upcoming US election. JPMorgan’s recent report highlights the growing interest in what they call the ‘debasement trade’, favoring both precious metals and cryptocurrencies in uncertain times.
The term ‘debasement trade’ encompasses the surge in demand for gold due to factors like increased geopolitical uncertainty since 2022 and concerns about long-term inflation trends and government deficits across major economies. JPMorgan notes that recent developments have led investors to view Bitcoin and gold as similar safe-haven assets.
According to the report, the rise in open interest on Bitcoin futures on the Chicago Mercantile Exchange (CME) indicates that institutional investors, including hedge funds, are considering both gold and Bitcoin as viable options. The number of contracts for BTC futures has quadrupled since the beginning of 2024, suggesting a growing interest in the cryptocurrency market.
Additionally, the inflow of funds into Bitcoin exchange-traded funds (ETFs) in September following an outflow in August indicates that retail investors are also viewing gold and Bitcoin in a similar light. Data from fund researcher Morningstar shows that cryptocurrency ETFs received over $20 billion in investments in 2024, signaling a growing interest in digital assets.
The report also speculates that a victory for Republican presidential nominee Donald Trump in the upcoming US election could further amplify the ‘debasement trade’. Trump’s regulatory stance on Bitcoin, along with his proposed expansionary fiscal policies, could benefit both Bitcoin and gold in the long run.
As Trump vies for a second term in office, his promises to support the crypto industry by overhauling regulatory bodies like the SEC and positioning the US as a leading crypto hub have captured the attention of investors. With uncertainties on the horizon, the ‘debasement trade’ seems poised to play a significant role in the financial landscape in the coming months.
