JPMorgan analysts believe that 'depreciation trading,' a strategy where investors hedge against fiat devaluation with assets like gold and Bitcoin, is becoming a long-term trend.
Depreciation Strategy and Its Significance
The 'depreciation trading' strategy involves using assets that preserve value against fiat devaluation, often triggered by factors like inflation, rising government debt, and geopolitical instability. Gold and Bitcoin have become prime candidates for this strategy, attracting the attention of both institutional and individual investors.
Increasing Importance of Gold and Bitcoin
Nikolaos Panigirtzoglou and his team highlighted the growing structural importance of gold and Bitcoin in investor portfolios in their 2018 report. 'The rise in gold prices over the past year has far outpaced the movements implied by dollar and real bond yield changes,' the analysts noted. Bitcoin is also gaining importance, with record capital inflows into the cryptocurrency market in 2024 pointing to its growing role as a portfolio staple.
Forecasts and Investment Impact
JPMorgan analysts remain bullish on the outlook for both gold and Bitcoin. In October, they predicted a bullish outlook for cryptocurrencies through 2025, driven by bearish trading and increasing institutional adoption. If fiat currency problems persist, analysts argue that assets like gold and Bitcoin will become even more attractive to investors.
JPMorgan analysts suggest that the 'depreciation trade' strategy involving gold and Bitcoin will continue to hold significance, remaining relevant to protect portfolios from fiat devaluation.
