JPMorgan Analysts on the Debasement Trade

JPMorgan analysts have stated that the “debasement trade” is a persistent trend, with gold and bitcoin gaining structural prominence in investor portfolios.

Gold Price Appreciation

According to the report led by analyst Nikolaos Panigirtzoglou, the significant appreciation of gold prices over the past year has exceeded expectations based on dollar and real bond yield shifts, reflecting the re-emergence of the debasement trade.

Bitcoin’s Role

In 2024, the crypto market witnessed a record capital inflow, indicating that bitcoin is becoming increasingly important for investors. The debasement trade is a strategy where assets like gold and bitcoin are used to hedge against fiat currency devaluation, often driven by inflation, rising government debt, and geopolitical instability.

Structural Rise of Gold

The rise of gold’s significance in investor portfolios is shown by the increasing amounts held for investment by central banks and private investors, including physical gold, gold ETFs, and other investment vehicles.

Crypto Market Growth

The analysts labeled 2024 as a “pivotal year” for the crypto market, estimating a record $78 billion influx. Key components included:
– $27 billion net inflow into crypto funds
– $14 billion in CME futures
– $14 billion raised by crypto venture capital funds
– $22 billion in bitcoin purchases by MicroStrategy
– $1 billion in purchases by bitcoin miners

MicroStrategy’s purchases alone represented 28% of the total capital inflow into the crypto market for 2024.

Conclusion

The analysts conclude that the growing importance of gold and bitcoin indicates that the debasement trade is likely to persist, and they remain optimistic about the crypto market heading into 2025, fueled by factors like the debasement trade and increasing institutional adoption.