Debasement Trade Fuels Bitcoin Surge: JPMorgan Sets Year-End Target at $165K

In a landscape characterized by economic uncertainty and fiscal unpredictability, Bitcoin and gold have become the safe havens of modern investing. This trend, known as the ‘debasement trade,’ is increasingly popular among retail investors who are seeking refuge from the stormy seas of governmental instability and inflation fears.

The Rise of the Debasement Trade

The recent U.S. government shutdown has intensified the debasement trade, causing significant price upswings in Bitcoin and gold. Retail investors, wary of fiscal deficits and the depreciating value of fiat currencies, especially in emerging markets, have turned to these assets en masse. This movement marks a substantial shift in the market dynamics, largely driven by individual rather than institutional participation.

Over the past year, funding into both spot Bitcoin and gold ETFs has climbed dramatically. According to JPMorgan analysts, Bitcoin ETFs saw an initial spike in inflows at the start of 2025, with a recent cooling in August, while gold ETFs continue their upward trend, slowly closing the gap. Institutions have participated mainly via CME futures, but ETF inflows highlight a pronounced retail investor influence.

ETF Trading Volumes Reach Unprecedented Levels

Analysts like Eric Balchunas from Bloomberg have noted the remarkable trading volumes of gold ETF GLD and Bitcoin ETF IBIT, both ranking in the top ten by volume. This rare occurrence underscores the widespread eagerness to participate in the debasement trade, with investors keenly aware of its potential to hedge against uncertainties.

JPMorgan: Bitcoin Set for New Heights

JPMorgan’s analysis suggests a significant mispricing of Bitcoin relative to gold. Bitcoin’s current market volatility has dipped below a ratio of 2.0 compared to gold, implying it requires nearly twice the risk capital as gold. To align Bitcoin’s current $2.3 trillion market cap with the approximately $6 trillion in private gold investments through ETFs and other forms, a 42% increase is needed, projecting Bitcoin’s price to $165,000 by the end of the year. With recent surges in gold prices, Bitcoin becomes even more attractive to investors. Adjusted year-end targets reflect the shifting value perceptions, underscoring Bitcoin’s growing role as a store of value alongside traditional assets like gold.

As global economic conditions continue to evolve, the interplay between traditional and digital assets will only grow more intertwined, offering both opportunities and challenges for savvy investors.