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Cryptocurrency News Articles
Investors Turn to Gold and Bitcoin (BTC) in a 'Debasement Trade' as They Brace for a 'Catastrophic Scenario' Amid Rising Geopolitical Tensions: JPMorgan
Oct 04, 2024 at 05:01 am
Rising geopolitical tensions and the coming [United States] election are likely to reinforce the 'debasement trade' thus favoring both gold and Bitcoin
Investors are turning toward gold and Bitcoin ( BTC ) in a so-called “debasement trade” as they prepare for a “catastrophic scenario” amid rising geopolitical tensions, an Oct. 3 report by JPMorgan claims.
Rising tensions and the upcoming U.S. election are likely to drive the ‘debasement trade,’ favoring both gold and Bitcoin, the report, which was shared by JPMorgan with Cointelegraph, states.
The so-called ‘debasement trade’ is a spike in gold demand caused by factors ranging from “structurally higher geopolitical uncertainty since 2022, to persistent high uncertainty about the longer-term inflation backdrop, to concerns about […] persistently high government deficits across major economies,” among others, according to JPMorgan.
Spiking open interest on BTC futures on the Chicago Mercantile Exchange (CME) suggests “speculative institutional investors such as hedge funds might see gold and Bitcoin as similar assets,” the report states.
Net open interest on CME BTC futures has risen from around 10,000 contracts at the start of 2024 to over 40,000 as of Oct. 1.
“In addition, the fact that Bitcoin [exchange-traded funds] started seeing inflows again in September after an outflow in August suggests that retail investors might also see gold and Bitcoin in a similar fashion,” the report adds.
Crypto ETFs saw inflows of over $20 billion in 2024, according to data from fund researcher Morningstar.
The U.S. Securities and Exchange Commission (SEC) finally approved spot BTC and Ether ( ETH ) ETFs in January and July, respectively.
The ‘debasement trade’ could be further fueled if Republican presidential nominee Donald Trump wins the U.S. presidential election in November.
“A Trump win in particular, apart from being supportive of Bitcoin from a regulatory point of view, would likely reinforce the “debasement trade” both via tariffs (geopolitical tensions) and via an expansionary fiscal policy (“debt debasement”),” the report states.
Trump has courted the crypto industry with promises to “fire” the SEC’s chair, Gary Gensler, and to make the U.S. the “crypto capital of the world.”
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