JPMorgan analysts say investor confidence is shifting away from Bitcoin BTC/USD toward gold, as the precious metal gains momentum as the preferred inflation hedge amid growing economic uncertainty.
What Happened: In a recent note led by Nikolaos Panigirtzoglou, the bank's team of strategists pointed to Bitcoin's high volatility and its increasing correlation with equities as weakening its long-touted "digital gold" status, The Block reported on Thursday.
"The sharp rise in gold prices highlights a stronger investor appetite for traditional safe havens," the report noted, with gold surpassing $3,100 per ounce this year.
The move is being driven by what analysts call the "debasement trade," a strategy focused on acquiring assets like gold and Bitcoin to protect against currency devaluation, inflation, and long-term sovereign debt.
According to JPMorgan, gold is now the clear frontrunner in this strategy, with investors seemingly stepping back from Bitcoin following its strong gains at the end of 2024.
Data supports the trend: Spot Bitcoin ETFs have posted consistent outflows over the past two months, while gold-backed ETFs continue to attract fresh capital, with futures data echoeing this sentiment.
Since mid-January, Bitcoin futures have seen a decline in long positions, whereas gold futures have remained stable.
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What’s Next: JPMorgan analysts believe this reflects sustained demand from both private investors and central banks for gold, rather than short-term speculation.
Global gold allocations have now reached an all-time high, the analysts said, estimating that approximately $9 trillion — or 3.5% of the world's total financial assets — is currently held in gold.
Of that, $4 trillion is in the hands of central banks, while $5 trillion is held by private investors.
Despite Bitcoin's recent surge, currently trading near $83,700, JPMorgan suggests that its fundamental support levels may be closer to $62,000 — its estimated production cost — and a volatility-adjusted valuation around $71,000.
Panigirtzoglou said that these benchmarks could serve as reference points, particularly the production cost, which has historically acted as a price floor.
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