Analysts at JPMorgan Chase said that rising geopolitical tensions and the upcoming US presidential election are driving investors to turn to gold and Bitcoin as safe-haven assets, a phenomenon described as a "depreciation trade" ( debasement trade).

Is rising geopolitics good for Bitcoin?

"Heightened geopolitical tensions and the upcoming U.S. election could reinforce what some investors call ' depreciation trade", thus benefiting gold and Bitcoin."

The so-called "devaluation trade" is an investment strategy in which investors choose to invest funds in assets such as gold or Bitcoin that are considered "safe havens" when they expect that a country's legal currency (usually the U.S. dollar) will depreciate. assets. The idea behind this strategy is that in the event of currency depreciation or loss of purchasing power, the value of these safe-haven assets will typically rise relatively because they are viewed as more reliable stores of value.

The report adds that while gold has had a muted reaction to recent geopolitical events, its price has risen sharply over the past quarter and approached the $2,700 level on September 26. Analysts said:

"The rise in gold prices has been driven by a 4-5% decline in the U.S. dollar and a sharp 50-80 basis point decline in real U.S. Treasury yields. However, gold has appreciated more than these factors can explain on their own, suggesting a 'depreciation trade' "Reappeared."

The report noted that this "depreciation trade" is driven by a range of factors, including increased geopolitical uncertainty since 2022, ongoing inflation concerns, large government deficits in major economies, and concerns about fiat currencies. Confidence has weakened, especially in some emerging markets.

Standard Chartered Bank: Bitcoin is difficult to hedge geopolitical risks

On the other hand, Geoff Kendrick, global head of digital asset research at Standard Chartered Bank, also said that although risks in the Middle East may lead to lower Bitcoin prices, as Donald Trump’s odds of winning the U.S. presidential election continue to increase, investors should treat it as An opportunity to move forward on dips. Geoff Kendrick said:

“Risk concerns related to the Middle East appear destined to push Bitcoin below $60,000 before the weekend. However, positions such as the $80,000 call option highlighted here and the cycle relative to Trump probability suggest that investors should hunt the dip now. Buy.”

And Geoff Kendrick believes that Bitcoin is not acting as a safe haven against geopolitical tensions. Compare that to gold, which is widely used as a geopolitical hedge. Bitcoin is more intended to be a hedge against traditional financial problems such as bank failures or de-dollarization/US Treasury sustainability issues.

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