Bitcoin to benefit from Trump presidency and MicroStrategy plan
Now that Donald Trump has won the US presidency, both gold and bitcoin are expected to perform well, according to JPMorgan analysts, who highlight the "debasement trade."
Debasement trading refers to an investment strategy that profits from the devaluation or weakening of a currency, usually due to inflationary or expansionary fiscal policies. In this trade, investors buy assets such as gold and bitcoin, which are seen as stores of value that can maintain their value even when a currency's purchasing power declines.
"Currency devaluation is likely to be reinforced by both tariffs and geopolitical tensions, as well as expansionary fiscal policy ('debt debasement')," JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, wrote in a report on Wednesday. "We do not see the initial negative reaction of the gold market as a rejection of 'currency debasement' following Trump's victory. After all, bitcoin, the other component of 'currency debasement', rallied following Trump's victory."
Gold and bitcoin prices expected to rise
The pace of central banks' gold purchases will be crucial in determining the gold price trajectory through 2025, JPMorgan analysts said. Central banks significantly increased their gold holdings in 2022 after the war in Ukraine broke out and sanctions were imposed on Russia, the analysts noted. While the People's Bank of China, the country's central bank, has halted its gold purchases since last April, ongoing tariffs and geopolitical tensions are expected to prompt further diversification by central banks, including the People's Bank of China, away from dollar reserves and toward gold.
