Bitcoin, the U.S. dollar, and global bonds could face significant positioning risks heading into 2025

Using their Cross Asset Positioning Monitor, JPMorgan highlights potential vulnerabilities as markets adjust to shifting liquidity and demand dynamics.

Bitcoin (CRYPTO:BTC) , the U.S. dollar, and global bonds are among the asset classes that could face significant positioning risks heading into 2025, JPMorgan analysts said in a note Friday.

Using their Cross Asset Positioning Monitor, JPMorgan highlighted potential vulnerabilities as markets adjust to shifting liquidity and demand dynamics.

Bitcoin and the U.S. dollar are flagged for positioning risks. The bank said it sees "elevated equity positions, modestly long duration positions, close to neutral credit positions, elevated long dollar positions, underweight positioning in commodities ex gold, elevated positions in bitcoin but more modest longs in gold."

"Thus from a positioning point of view the most vulnerable asset classes into 2025 are equities, the dollar and bitcoin and the least vulnerable are non-gold commodities," the bank added.

On bonds, the global supply-demand balance is expected to deteriorate in 2025.

JPMorgan projects a $0.9 trillion decline in global bond demand compared to 2024, alongside a relatively modest $100 billion reduction in net supply.

They explained that this imbalance could result in upward pressure on yields, with the Global Aggregate Bond Index yield potentially rising by 40 basis points.

Central banks will play a key role in these dynamics. While the Federal Reserve is expected to end balance sheet contraction in early 2024, it will continue shifting from mortgage-backed securities (MBS) to Treasury bills, JPMorgan noted.

They added that the European Central Bank (ECB) is set to fully stop reinvestments in its PEPP portfolio, and the Bank of Japan (BoJ) is likely to accelerate net bond sales in 2025.

Together, these actions contribute to modest improvements in central bank bond demand, but not enough to offset the broader decline in global demand, according to JPMorgan.