JPMorgan warns that rising geopolitical tensions may drive investors to gold and Bitcoin

Investors are increasingly looking to gold and Bitcoin as part of a “debasement trade” in response to growing geopolitical tensions and fears of a “catastrophic scenario,” according to a report from JPMorgan dated October 3.

The report highlights that the upcoming U.S. election and escalating global conflicts are likely to bolster this “debasement trade,” making gold and Bitcoin more appealing. This term refers to heightened demand for gold driven by various factors, including increased geopolitical uncertainty since 2022, persistent inflation worries, and significant government deficits across major economies.

JPMorgan notes a significant uptick in open interest for Bitcoin futures on the Chicago Mercantile Exchange (CME), indicating that institutional investors, like hedge funds, may perceive gold and Bitcoin as comparable assets. Net open interest in Bitcoin futures has surged from around 10,000 contracts at the start of 2024 to over 40,000 by October 1.

The report also mentions that retail investors appear to view gold and Bitcoin similarly, as evidenced by renewed inflows into Bitcoin exchange-traded funds (ETFs) in September after a dip in August. Cryptocurrency ETFs have attracted over $20 billion in inflows throughout 2024, according to data from Morningstar.

The U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin and Ether ETFs in January and July, respectively, which has further fueled interest.

If Donald Trump wins the upcoming elections, the “debasement trade” may intensify. The report suggests that a Trump victory could support Bitcoin through favorable regulatory changes and exacerbate the debasement trade via tariffs and expansionary fiscal policies related to national debt.

Trump has actively engaged with the crypto community, vowing to remove the SEC chairman, Gary Gensler, and position the U.S. as the “crypto capital of the world.”

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