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According to JPMorgan analysts, a win for the Republican US presidential candidate Donald Trump could further fuel Bitcoin (BTC) price momentum.
Retail Investors Turn To Bitcoin For ‘Debasement Trade’
In a recent client note, analysts at JPMorgan suggested that a Trump win might provide ‘additional upside’ for both BTC and gold, as retail investors increasingly view Bitcoin as a ‘debasement trade.’
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In simple terms, a debasement trade is a strategy to protect purchasing power against the steady erosion of fiat currencies due to extensive money printing.
Notably, the M2 money supply – a measure of total money in circulation – sharply rose during the coronavirus pandemic. This surplus in money supply led to heightened inflation, forcing the U.S. Federal Reserve (Fed) to raise interest rates to contain it.
By purchasing BTC, retail investors aim to maintain their money’s value, hoping Bitcoin will act as a hedge against currency depreciation. The JPMorgan note states:
Retail investors appear to be embracing the ‘debasement trade’ in an even stronger manner by buying bitcoin and gold ETFs. The retail impulse is also seen in meme and AI tokens the market cap of which has outperformed.
Data from SoSoValue shows that Bitcoin exchange-traded funds (ETF) have attracted a whopping $1.3 billion in inflows over the past two days alone. As of October 30, the cumulative net inflow to US-based spot BTC ETFs is $24.18 billion.
October’s total ETF inflows alone amount to $4.4 billion, marking it the third-highest month for BTC ETF inflows since their launch earlier this year.
However, institutional investors appear to have slowed down on BTC futures activity recently, with analysts noting that Bitcoin futures have entered overbought territory, potentially introducing vulnerability for BTC’s near-term outlook.
The client note highlights that credit and prediction markets lean toward a Trump win, unlike equities, foreign exchange (FX), and rates markets. The analysts conclude:
Overall, to the extent a Trump win inspires retail investors to not only buy risk assets but to also further embrace the ‘debasement trade’, there could be additional upside for bitcoin and gold prices in a Trump win scenario.
Where Is BTC Headed? Analysts Share Their Outlook
Bitcoin is trading within 2% of reaching a new all-time high (ATH), driving renewed optimism among crypto analysts.
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For instance, crypto analyst Timothy Peterson recently posited that BTC could surge to as high as $100,000 by February 2025.
Meanwhile, crypto options trading data indicates that traders remain confident BTC will hit $80,000 by the end of November 2024, regardless of the election outcome.
Veteran trader Peter Brandt, however, has urged caution, advising BTC bulls that a daily close above $76,000 is critical for confirming a true breakout. At the time of writing, BTC is trading at $71,798, down 0.1% in the past 24 hours.
Featured image from Unsplash, Charts from FRED and Tradingview.com
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