JPMorgan analysts recently emphasized the potential for a “debasement trade,” which they argue could push up prices of assets like gold and Bitcoin.
An investment strategy known as the “debasement trade” profited from a currency’s devaluation or weakness, usually as a result of expansionary or inflationary fiscal policies.
In this transaction, investors purchase assets such as Bitcoin and Gold, which are seen as repositories of value that can hold their value even when the purchasing power of a currency declines.
Gold & Bitcoin Expected to Boom Under Trump Presidency
A team led by managing director Nikolaos Panigirtzoglou at JPMorgan suggests that the debasement trade could gain further traction under Trump’s presidency due to factors like tariffs, geopolitical tensions, and expansionary fiscal policies (sometimes called “debt debasement”).
“We note that the initial market reaction by gold was not a repudiation of the ‘debasement trade’ following Trump’s win,” they noted. After all, Bitcoin—the other component of the debasement trade—rallied in response to Trump’s victory. Bitcoin rose dramatically following the election results. It reached an all-time high of $76,244 on November 6.
Trump’s policies, especially his plan to raise tariffs, are expected to result in inflation and potentially elevate political tensions. These factors could further devalue the U.S. dollar, prompting investors to turn to assets like gold and Bitcoin, which are traditionally seen as safe havens during economic downturns.
Bitcoin and Crypto to Benefit from Trump’s Victory
The day Trump’s victory was confirmed, market sentiment grew around Bitcoin’s potential it was a clear sign that the crypto industry will benefit in the coming days. Many in the cryptocurrency space see Trump’s presidency as supportive of digital currencies, with a broader view that he is shaping up to be crypto-friendly.
Given the anticipated inflationary effects of his economic policies, both Bitcoin and gold appear well-positioned for a price uptrend in a market environment influenced by Trump’s strategies.
As investors brace for the impact of Trump’s fiscal policies, increased attention on gold and bitcoin as safe-haven assets are expected, further reinforcing a trend of digital currencies gaining favour during periods of economic uncertainty.
On another note, Institutional involvement in gold futures has slowed, while gold ETFs have also witnessed consistent inflows, mostly from retail investors. The experts came to the conclusion that as retail investors join the “debasement trade,” a Trump victory might significantly increase the price of gold and Bitcoin.