As geopolitical tensions between Iran and Israel intensify, JP Morgan highlights that investors could turn to gold and Bitcoin to protect their capital. These assets are considered safe havens in the face of geopolitical uncertainty, as part of what the bank calls the “debasing trade”.
Gold and Bitcoin as a hedge against global conflict
In recent weeks, relations between Iran and Israel have deteriorated significantly, particularly after the assassination of Hassan Nasrallah, leader of Hezbollah. In retaliation, Iran launched 200 missiles at Israel, causing the S&P 500 to drop about 1% and the CAC 40 to drop 2%.
The cryptocurrency market was not spared, recording a 5.30% drop in its total capitalization, thus threatening the short-term upward trend that was beginning to take shape. However, a rebound appears to be beginning, with an increase of 3% since the recent low.
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According to The Block, JP Morgan analysts, including Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole and Krutik P. Mehta, anticipate that tensions in the Middle East could prompt investors to turn to both gold and Bitcoindue to their safe-haven characteristics, within the framework of what they call “depreciation exchanges”.
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Depreciation Trades Could Benefit Bitcoin
The notion of “debasing trade” reflects an investment strategy where distrust of traditional currenciesaccentuated by global tensions and economic policies, pushes investors to diversify their portfolios by favoring assets independent of governments and central banks.
JP Morgan specifies:
“Increasing geopolitical tensions and the upcoming US election will likely reinforce what some investors call the “debasing trade”, thus favoring both gold and Bitcoin. »
They explained in particular that interest in gold in recent months had already exceeded the performance of what the fundamentals could justify :
“This increase in the price of gold is influenced by a 4-5% decline in the dollar and a significant fall in real Treasury yields of 50-80 basis points. However, gold’s appreciation has exceeded what these factors alone would suggest, indicating a re-emergence of the debasing trade.
In summary, according to JP Morgan, although gold is traditionally considered the safe haven par excellence, its almost continuous upward trend since the beginning of 2024 could encourage some investors to look for other diversification assets with similar characteristics, and the Bitcoin could emerge as an alternative.
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However, since the Iranian strikes on Israeli soil, BTC has not fulfilled its role as a safe haven. Its price fell by around 6%, and despite a 3% rebound in the last 24 hours, it was mainly gold and the dollar that saw the rise.
Indeed, although gold has fallen 0.3% over the last three hours, it remains up since the attacks. Likewise, the dollar index (DXY) is up 1.7% since the start of the week.
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Source : The Block
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First attracted by the lure of gain, I am now trapped deep into the rabbit hole. With no way out, I just have to share my knowledge and convey the passion I have for Bitcoin. I am also the creator of Adopt a Block, an educational site dedicated to Bitcoin.
Marius Farashi Tasooji
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