The Overture to 2025 Has a Familiar Tune: Bitcoin Rallies 8% as JPMorgan Says 'Debasement Trade Is Here to Stay'

The overture to 2025 has a familiar tune. It's not just the numbers: Bitcoin's 8% recovery from late December, but the news flow is equally recognizable.

Markets Update: Bitcoin Shows Signs of Life in 2025 Overture

The opening notes of 2025 in markets sound a familiar tune. It's not just the numbers, with Bitcoin up 8% since late December, but the news flow is equally recognizable.

Perhaps the most important note comes from JPMorgan, which says the market forces that drove bitcoin and gold to records last year are still around.

"The debasement trade is here to stay, with both gold and Bitcoin becoming increasingly important components of investors' portfolios," the investment bank wrote.

The debasement trade is a strategy where investors buy assets that protect against declines in fiat currencies and government bonds due to inflation and policy shifts.

Last year's debasement play drove bitcoin above $100,000 — a figure it's approaching again — and gold over $2,600. The rallies were fueled by increased geopolitical uncertainty, persistent inflation concerns, debt debasement in advanced economies, fears of fiat currency devaluation in emerging markets and a shift away from the U.S. dollar. Coupled with President-elect Donald Trump's pro-crypto stance, this led to a record $78 billion in net inflows into the digital assets market, according to JPMorgan.

Any discordant tone comes from elevated bond yields and a strong dollar driven by economic optimism and declining Fed rate-cut bets, which could limit upside potential in the short term. This Friday's nonfarm payrolls report will provide a critical test for the hawkish Fed narrative, with expectations for 154,000 job additions in December.

The shenanigans surrounding BTC-holder MicroStrategy (MSTR) deserve attention, particularly the social-media buzz about brokers reducing their exposure to the company. This reduction comes alongside significant increases in margin requirements, raising concerns about potential volatility.

Meanwhile, crypto economist Ben Lilly suggests that ether’s price has been suppressed by the growing number of coins locked up in the DeFi protocol Ethena, which shorts ETH futures as part of a delta-neutral hedge strategy to maintain the $1 peg of its stablecoin, USDe. ETH has jumped 10% in the first six days of the year but remains well below its record high.

"This suggests a shift in the market toward delta-neutral exposure on ETH instead of seeking upside by holding it as collateral. Thus, the ETH price is likely to be muted on the upside because of Ethena," Lilly said on X.

Ethena has announced plans to launch iUSDe, a version designed for institutional investors seeking exposure to yield-bearing USDe without direct token interaction. In other DeFi developments, the leading on-chain perp DEX exchange, Hyperliquid, has listed SOLV, the native token of the Bitcoin staking protocol Solv Protocol, and there are whispers of whales looking to buy up the HYPE token. Stay tuned.

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