A JPMorgan report indicated that due to the prevalence of the debasement trade, both gold and Bitcoin have gained structural importance in investors' portfolios. Bitcoin saw a record inflow of $78 billion in 2024, and following Trump's victory, both Bitcoin and gold as safe-haven assets will benefit, with such effects expected to continue into 2025.
The debasement trade continues to prevail
JPMorgan proposed the 'debasement trade' last October, with analysts stating that this trade is driven by multiple factors, including heightened geopolitical uncertainty since 2022, ongoing inflation concerns, massive government deficits in major economies, and weakened confidence in fiat currencies, especially in some emerging markets.
Due to the prevalence of the debasement trade, both gold and Bitcoin have gained structural importance in investors' portfolios.
The increase in gold prices over the past year (26%) far exceeded the trends implied by changes in the dollar and real bond yields, and may reflect a re-emergence of this debasement trade. The record capital inflow into the crypto market in 2024 also indicates that Bitcoin is becoming 'a more important component' in investors' portfolios.
The proportion of gold in non-bank investors' assets is increasing
According to The Block's report, the structural rise of gold in investors' portfolios is evident. This includes physical gold, gold ETFs, and other investment instruments, which currently make up a large portion of total assets held by non-bank investors worldwide.
Bitcoin saw a record inflow of $78 billion in 2024
Bitcoin is also becoming an increasingly important part of investors' portfolios. JPMorgan analysts claim that 2024 is a crucial year for the cryptocurrency market, estimating capital inflows into this sector to reach a record $78 billion. This includes:
Net inflow into cryptocurrency funds of $27 billion (revised down by $17 billion to reflect the shift from centralized exchange crypto wallets to more cost-effective and liquid spot Bitcoin ETFs)
$14 billion invested in CME futures
$14 billion venture capital fund raised through cryptocurrency
MicroStrategy purchased $22 billion and Bitcoin miners bought $1 billion worth of Bitcoin
MicroStrategy's Bitcoin purchases alone accounted for 28% of total capital inflows into the crypto market in 2024.
(Understanding MicroStrategy from scratch: The transformation journey from Business Intelligence (BI) to a Bitcoin empire)
Analysts believe that as gold and Bitcoin both gain structural importance, the debasement trade will continue. Previously, JPMorgan had also issued a report suggesting that Trump's victory would drive Bitcoin prices up, and with upcoming policies, both Bitcoin and gold as safe-haven assets will benefit, and this 'Trump trade' effect is expected to continue into 2025.
This article from JPMorgan: Gold and Bitcoin have become important investment structures, and the debasement trade will continue to prevail first appeared in Chain News ABMedia.
