JPMorgan says bitcoin and gold ETF outflows point to 'cooling' debasement trade amid hopes for Iran-US deal

Investors have been pulling money out of both bitcoin and gold exchange-traded funds over the past two weeks as the so-called debasement trade cools, according to JPMorgan analysts.

Bitcoin ETFs have seen larger outflows compared to gold ETFs, and these outflows appear more consistent with a broad retreat by investors from the debasement trade, potentially in anticipation of an Iran-U.S. deal, rather than with a rotation from bitcoin into gold, the JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report.

The debasement trade refers to investors buying assets such as bitcoin (BTC) and gold as hedges against concerns around geopolitical instability, fiat currency weakness, inflation, and related economic concerns.

The analysts said the same trend is also visible in futures markets, where institutional investors appear to have reduced exposure to both bitcoin and gold over the past two weeks.

Bitcoin futures saw a more significant retreat because bitcoin had become one of the main expressions of that trade since the start of the Iran conflict, the analysts noted.

JPMorgan's momentum signal framework also pointed to weakening positioning from momentum-focused traders such as commodity trading advisors, or CTAs.

The analysts said positioning buildup from those traders lost momentum in both bitcoin and gold over the past one to two weeks, again suggesting a broader "cooling" of the debasement trade.

Until earlier this month, bitcoin was outperforming gold as the debasement trade following the Iran conflict, the JPMorgan analysts had noted, as bitcoin ETFs were attracting inflows while gold ETFs struggled to recover earlier outflows. But amid weakening sentiment, bitcoin ETFs have recently started seeing outflows.

BlackRock's IBIT bitcoin ETF, for instance, recorded an outflow of $527.8 million on Wednesday, its second-largest daily outflow since launch. Overall, U.S. spot bitcoin ETFs recorded $733.4 million in net outflows on Wednesday, marking their largest daily outflows since Jan. 29, according to SoSoValue data.

Bitcoin is currently trading around $72,750, down nearly 3% over the past 24 hours, according to The Block's bitcoin price page.