Investors are scaling back exposure to both bitcoin and gold, signaling a weakening appetite for traditional inflation and geopolitical hedges as markets reassess the outlook for Middle East tensions.
The “debasement trade” that previously supported strong demand for both assets during periods of heightened uncertainty is losing momentum, according to JPMorgan analysts led by Nikolaos Panigirtzoglou.
In a report on Thursday, the bank said investors have been withdrawing capital from bitcoin and gold ETFs simultaneously, while institutional positioning in CME futures linked to both assets has also softened. The parallel decline suggests a broader unwind of macro hedge positioning that gained traction earlier in the year amid inflation concerns and geopolitical instability.
Data from Farside Investors shows bitcoin ETFs have recorded steady outflows over the past two weeks, closely mirroring weakness in gold ETF flows. Futures positioning across both markets has also eased, pointing to reduced institutional demand rather than a rotation between the two assets.
Panigirtzoglou said the pattern does not indicate investors are switching from bitcoin into gold, but rather that both trades are fading at the same time.
“Bitcoin had been the main manifestation of the debasement trade since the start of the Iran conflict,” the report noted.
The debasement trade refers to positioning in assets seen as stores of value during periods of rising inflation risk, fiscal expansion, or currency weakness. Bitcoin and gold typically benefit when markets expect higher government spending, widening deficits, or prolonged monetary accommodation.
Those themes gained traction earlier this year as Middle East tensions pushed oil prices higher and revived concerns about renewed inflationary pressures across global markets.
However, JPMorgan suggested the recent shift may reflect growing expectations that geopolitical risks could be easing. Investors may also be positioning ahead of potential diplomatic progress between the United States and Iran, reducing the need for traditional hedges tied to inflation and conflict risk.
The report highlights a broader cooling in macro-driven positioning, as investors step back from defensive trades amid improving risk sentiment.
