JPMorgan highlights how escalating global tensions and uncertainty surrounding the U.S. election are driving investors toward Bitcoin and gold, positioning both assets as key beneficiaries of the "debasement trade" amid concerns over inflation and government deficits.

Rising Global Tensions and US Election Drive Investor Interest

The so-called "debasement trade" is attracting investors who are preparing for a "catastrophic scenario" in the face of increasing global tensions, as reported by JPMorgan on October 3rd.

"Rising geopolitical tensions and the coming United States election are likely to reinforce the ‘debasement trade’ thus favoring both gold and Bitcoin," the research states, as shared with Cointelegraph by JPMorgan.

Bitcoin and Gold See Increased Demand

Factors such as "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," have led to a surge in the demand for gold, which is referred to as the "debasement trade," JPMorgan stated.

Report: "speculative institutional investors such as hedge funds might see gold and Bitcoin as similar assets" based on the spike in open interest in BTC futures on the Chicago Mercantile Exchange (CME).

Bitcoin Futures Contracts Surge on CME

As of October 1st, net open interest in CME Bitcoin futures was over forty thousand contracts, up from about 10,000 contracts at the beginning of 2024.

"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 paper states.

Cryptocurrency ETF Investments Rebound

Morningstar, a research firm, estimates that more than $20 billion was invested in cryptocurrency exchange-traded funds in 2024.

Both the spot Bitcoin ETF and the Ether ETF were approved by the US Securities and Exchange Commission (SEC) in January and July, respectively.

A Trump Win Could Amplify the Debasement Trade

If Republican nominee for president, Donald Trump, wins the election in November, the 'debasement trade' might become much more noticeable.

"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 stated.

Trump’s Crypto Stance Could Shape Markets

With pledges to "fire" SEC head Gary Gensler and establish the United States as the "crypto capital of the world," Trump has courted the cryptocurrency business.