A potential Donald Trump victory in the upcoming U.S. presidential election could drive sales of bitcoin and gold into a wave of retail interest, according to JPMorgan analysts. A report released Wednesday led by Managing Director Nikolaos Panigirtzoglou in the JPMorgan team outlined how election outcomes might affect these assets and argued they appear undervalued. Despite institutional caution, they think a Trump win might help retail trading in bitcoin and gold. They noted:
“Retail investors appear to be embracing the ‘debasement trade’ in an even stronger manner by buying bitcoin and gold ETFs.”
An intriguing contrast in how retail and institutional investors behave in the market is detailed in the report. Bitcoin has seen record inflows into bitcoin exchange-traded funds (ETFs) during a time of retail interest in the asset. From a striking $4.4 billion in total in October alone, retail investors poured $1.3 billion into bitcoin ETFs alone in the first two days of October. The increasing attraction of cryptocurrency among retail investors makes October the third-highest month for bitcoin ETF inflows since January.
Retail Interest Expands Beyond Bitcoin and Gold, Analysts Indicate
This growing retail interest is not limited to bitcoin and gold, analysts said. ‘Meme and AI tokens’ have also caught the fancy of retail traders, who are embracing it apart from everything else in the digital asset market. This indicates that retail investors are moving away from traditional investments such as gold and looking to the new, high risk areas of the digital economy.
But while the JPMorgan report is a cautious piece, it quite clearly does not accurately reflect the view of institutional investors. The analysts cautioned that future bitcoin contracts are overbought and could lead to risks for the value of the digital asset moving ahead. Generally, institutional investors seek long term stability and growth, which may scare them from being adding to their bitcoin stacks in futures and volatility in crypto market.
Institutions are taking this same cautious stance on gold too, going from gold ETFs for retail investors while institutional trading in gold futures has stopped largely. Retail and institutional investors alike give JPMorgan’s analysts mixed responses, but the analysts insist that things will be warm for both bitcoin and gold due to macroeconomic uncertainty, inflationary pressures and the possibility of policy changes under a Trump administration through 2024. They concluded:
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“Overall, to the extent a Trump win inspires retail investors to not only buy risk assets but to also further embrace the ‘debasement trade’, there could be additional upside for bitcoin and gold prices in a Trump win scenario.”
Bitcoin and Gold Serve as Hedge Against Economic Volatility
Bitcoin and gold are among the assets that could act as a hedge against inflation and an uncertain geopolitical landscape as the global economy struggles with simmering inflation and an unpredictable geopolitical landscape, with retail investors looking to protect from economic volatility. While the report’s optimistic tone does not match the attitude of JPMorgan CEO Jamie Dimon, it nevertheless builds excitement about the emerging technology’s potential, something many others have failed to do.
Dimon’s stance on Bitcoin is well known, and he has long derided its worth as a speculative asset with no intrinsic value. Dimon reiterated his view earlier this week, claiming Bitcoin has no ‘intrinsic value.’ He also criticizes bitcoin for its association with illicit activities and has even supported stricter regulations if he has a say in policy. That stands in contrast to JPMorgan’s broader blockchain and digital asset efforts, which have seen the bank embrace digital assets and even bitcoin ETFs to serve its client needs.
JPMorgan’s embrace of blockchain technology, alongside Dimon’s critiques of bitcoin, illustrates a growing trend among major financial institutions: hedge funds that are interested in engaging with blockchain innovation but cautious of some assets on the digital token. The allure of blockchain as a transformative technology of finance is still strong, but some leaders of traditional finance are still not sold on Bitcoin’s high volatility and regulatory issues.
Conclusion
JPMorgan analysts anticipate a surge in retail interest in bitcoin and gold if Trump wins the 2024 election, even if institutions shied away from overbought futures. The rising trend of cryptocurrency, coupled with inflation fears and macroeconomic uncertainty, could help increase growth in the field, though Jamie Dimon is skeptical about the value of bitcoin.
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