JPMorgan says debasement trade retreat has 'accelerated' for bitcoin

Investors have continued to move away from the so-called debasement trade, with the retreat accelerating for bitcoin while continuing for gold, according to JPMorgan analysts.

Gold exchange-traded funds saw around $20 billion of outflows in the week through June 5 after modest inflows the previous week, while bitcoin ETFs have recorded gradually increasing outflows over the past four weeks, JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report.

"We see broad based retreat of the debasement trade by both retail and institutional investors," the analysts said. "This retreat from the debasement trade has continued for gold and if anything accelerated for bitcoin in recent weeks."

The debasement trade refers to investor demand for bitcoin and gold driven by concerns including geopolitical uncertainty, persistent inflation, rising government debt, weakening confidence in fiat currencies and diversification away from the U.S. dollar. According to the analysts, that trade has been fading in recent weeks across ETFs, futures markets and investor positioning.

Institutional investors have also continued reducing exposure through futures markets. Gold positioning has steadily declined since late February, while bitcoin, which had been the main expression of the debasement trade since the start of the Middle East conflict, began reversing in early May and has since weakened further, the analysts said.

JPMorgan's momentum indicators show a similar trend. Gold investors have been cutting long positions since late February, while bitcoin initially benefited from short covering before reversing in early May. The analysts added that new short positions may have amplified this week's decline in gold.

The analysts also tracked allocations by non-bank investors to bitcoin and gold relative to equities, bonds and cash. After steadily rising since mid-2023, those allocations have fallen back to levels last seen in March 2025. JPMorgan also said bitcoin's decline appears to have been amplified by weaker liquidity in both ETF and futures markets.

Bitcoin and gold behaving more like risk assets

The analysts also highlighted a shift in market correlations. Bitcoin's correlation with 10-year U.S. real Treasury yields has recently turned negative, following a similar move in gold earlier this year, suggesting that the opportunity cost of holding non-yielding assets is weighing on both.

At the same time, gold's correlation with the S&P 500 has moved closer to bitcoin's traditionally positive relationship with equities, suggesting that both assets have recently behaved more like risk assets than portfolio diversifiers.

The report largely reiterates JPMorgan's cautious stance on digital assets published last week. The analysts again said a stronger second half would likely require digital asset treasury companies to provide greater clarity on meeting rising dividend obligations, potentially by rebuilding dollar reserve funds, and for U.S. crypto market structure legislation to pass, an outcome they currently assign less than a 50% probability.

Despite the cautious outlook, the analysts reiterated that current weak market sentiment could ultimately prove "a bullish contrarian signal going forward."