A recent research note by JPMorgan highlights the growing trend of investors seeking to hedge against geopolitical uncertainty and inflation through gold and Bitcoin. The debasement trade, as it has come to be known, is a phenomenon that shows no signs of slowing down in 2025.
The Rise of Geopolitical Uncertainty
Geopolitics have been at the forefront of investors’ concerns since 2022. The ongoing conflict between major powers, coupled with rising tensions and unpredictability, has created an environment where risk aversion is on the rise. In such a scenario, gold and Bitcoin are increasingly being viewed as essential components of portfolios.
The Role of Inflation
Inflation remains a pressing concern for investors, with many wondering whether it will persist in 2025. The recent increase in government deficits across major economies has raised concerns about ‘debt debasement,’ which can lead to inflation and erode the purchasing power of currencies. Gold and Bitcoin are seen as safe-havens against such risks.
The Connection between Gold and Bitcoin
JPMorgan notes that gold and Bitcoin appear to have become more important components of investors’ portfolios structurally. The bank cites record capital inflow into crypto markets in 2024 as a key factor driving this trend. Institutional investors, including Paul Tudor Jones, are increasingly seeking exposure to both assets.
US State Governments Embrace Bitcoin
In December, US state governments began adding Bitcoin to their treasuries as a hedge against fiscal uncertainty. This move underscores the growing acceptance of cryptocurrencies by mainstream institutions.
Investment Managers Flocking to BTC
US investment managers are also increasing their exposure to Bitcoin, citing concerns that ‘all roads lead to inflation’ in the United States. In October, JPMorgan noted that spiking open interest on BTC futures is another indicator that funds might see gold and Bitcoin as similar assets.
CoinGlass Data Highlights the Growth of Open Interest
The data from CoinGlass shows that net open interest on BTC futures rose from approximately $18 billion in January 2024 to upward of $55 billion in December. This trend suggests a growing appetite for long-term exposure to Bitcoin among institutional investors.
Bitcoin ETF Inflows Reach Record Highs
In November, US Bitcoin ETFs broke the $100 billion mark in net assets for the first time, according to data from Bloomberg Intelligence. Crypto ETF inflows are among the most important metrics to watch as they tend to be driven by new funds entering the market.
The Potential Impact of Surging Institutional Inflows
Surging institutional inflows could cause positive ‘demand shocks’ for Bitcoin, potentially sending BTC’s price soaring in 2025, according to asset manager Sygnum Bank. This trend is expected to continue as investors seek exposure to both gold and Bitcoin as safe-havens against geopolitical uncertainty and inflation.
Conclusion
The debasement trade is becoming increasingly important for investors seeking to hedge against risks associated with geopolitics and inflation. Gold and Bitcoin are being viewed as essential components of portfolios, driven by record capital inflows into crypto markets in 2024. As institutional investors continue to flock to both assets, the potential impact on Bitcoin’s price cannot be ignored.
Additional Insights
- AI may already use more power than Bitcoin — and it threatens Bitcoin mining
- Crypto ETF inflows are among the most important metrics to watch as they tend to be driven by new funds entering the market.
- The ongoing conflict between major powers, coupled with rising tensions and unpredictability, has created an environment where risk aversion is on the rise.
Stay Ahead of the Curve
To stay ahead of the curve in 2025, consider subscribing to our Markets Outlook newsletter. Receive critical insights to spot investment opportunities, mitigate risks, and refine your trading strategies delivered every Monday.
