JP Morgan analysts predict that Bitcoin will outperform gold for the rest of the year. This change is linked to a shift in the “debasement trade” strategy, which involves buying gold and Bitcoin as a hedge against weakening currencies. By 2025, this strategy may become a zero-sum game. Gold prices had been rising while Bitcoin was declining, but this trend has reversed recently. After peaking in April, gold prices have fallen, while Bitcoin has gained popularity. This shift is due to funds moving out of gold ETFs and into Bitcoin and other crypto funds.

New Legislative Developments

Recent US legislation is also influencing this trend. New Hampshire has passed a bill allowing up to 10% of public funds to be invested in Bitcoin and precious metals. Arizona has enacted similar laws. These state-level decisions could positively impact the market for a longer time. Current data clearly shows that capital is rotating rather than new liquidity being introduced into alternative assets. Gold’s initial rise and subsequent decline since April have coincided with increased interest in Bitcoin, particularly from institutional investors rather than retail traders. Meanwhile, gold-backed exchange-traded products are seeing steady outflows, which are being redirected into cryptocurrency-linked funds. JP Morgan analysts expect Bitcoin to outperform gold through year-end. This forecast is based on actual asset flows and changes in macro hedging strategies. The term “debasement trade” captures this shift. Investors traditionally used gold to protect against inflation or currency devaluation, and more recently, Bitcoin. However, the hedging strategy appears to be shifting, with expectations of significant changes by 2025, possibly causing gains in one asset at the expense of the other.

Shift in State-Level Regulation

The changes in state regulations are more than just symbolic. New Hampshire and Arizona have set up legal frameworks for holding Bitcoin in public funds. Although these actions might start small, they could encourage longer-term investments. Even minor public-sector exposure could influence sentiment and prompt other states or institutions to follow suit. Past cycles show that legislation can legitimize assets in a way that speculation cannot. As traders, it’s practical to track fund flow data weekly and compare performance against known macro variables. Traditionally, gold is less volatile than Bitcoin, but it has underperformed recently in a changing inflation landscape. This underperformance is evident not just in prices but also in lower trading volumes and reduced implied volatility, making it a less appealing asset for aggressive macro shifts. Bitcoin, on the other hand, continues to attract capital not just from gold but also from other traditional risk assets. This trend is part of a broader shift, as institutions that once relied on gold now seem open to replacing it. This doesn’t mean gold will disappear; however, it raises questions about its future role, especially regarding monetary policy correlations. It’s also important to analyze how positioning is evolving in the derivatives markets. Open interest in Bitcoin futures has been steadily increasing, while the gold derivatives market shows a flattening of speculative positioning. This contrast signals intent among knowledgeable market participants, urging us to focus on actual risks taken by investors with long-term perspectives. There is also a behavioral aspect in play. Institutional decision-makers often seek regulatory approval or peer validation before acting. As states begin to recognize Bitcoin as a valid investment within fund portfolios, it gives these investors the green light to adjust their strategies. When we see institutions investing in Bitcoin-linked products alongside significant outflows from gold ETFs, it indicates a clear recalibration. In the upcoming weeks, it may be wise to limit exposure to gold volatility unless there’s evidence of a price rebound and increased institutional demand. Conversely, positioning in Bitcoin derivatives—especially long-term contracts—could offer attractive entry points if liquidity remains strong and fiat-hedging themes grow. Ultimately, understanding where capital is willing to commit is more important than mere price targets. Positioning should reflect asymmetry. Our adjustments should be based on market flows and depth, not just headlines. The theme is still unfolding, but current data shows a clear market conviction in one direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now