JPMorgan notes the ‘debasement trade’ is fading as inflation concerns begin to cool

Investors are reducing exposure to both bitcoin and gold, suggesting a broader unwind of inflation and geopolitical hedges as markets reassess risks tied to Middle East tensions.

The “debasement trade” that previously supported both assets during periods of heightened uncertainty is fading, according to JPMorgan analysts led by Nikolaos Panigirtzoglou.

In a note published Thursday, the bank said investors have been pulling capital from bitcoin and gold ETFs at the same time, while institutional positioning in CME futures for both markets has also weakened. The synchronized decline points to a broad reduction in macro hedge exposure that gained traction earlier this year amid inflation concerns and geopolitical volatility.

Data from Farside Investors shows bitcoin ETFs have recorded consistent outflows over the past two weeks, mirroring softer demand in gold ETFs. Futures positioning across both assets has also eased, indicating reduced institutional participation rather than capital rotating between them.

Panigirtzoglou emphasized that the data does not show a shift from bitcoin into gold, but rather a simultaneous cooling in demand for both trades.

“Bitcoin had been the main manifestation of the debasement trade since the start of the Iran conflict,” the report said.

The debasement trade refers to positioning in assets viewed as stores of value during periods of rising inflation risk, fiscal expansion, or currency depreciation. Bitcoin and gold tend to benefit in environments where investors expect higher government spending, persistent deficits, or loose monetary policy.

Those concerns intensified earlier in the year as Middle East tensions pushed oil prices higher and raised fears of renewed inflationary pressure in global markets.

JPMorgan suggested the recent pullback may reflect growing expectations that geopolitical risks are easing, with markets possibly positioning for de-escalation or diplomatic progress between the United States and Iran. Such developments would reduce demand for traditional hedges that had supported both bitcoin and gold in recent months.

Overall, the report points to a broad cooling in macro-driven positioning as investors step back from defensive trades amid improving risk sentiment.