Bitcoin fund flight accelerates! JPMorgan: Anti-devaluation trades are cooling, and the safe-haven glow is fading?

JPMorgan analysts said that as global investors assess risk, the “anti-debasement trades” that previously supported gold and Bitcoin are clearly cooling down.

JPMorgan (JPMorgan Chase) analysts said that as global investors reassess risk and reward, the “Debasement Trade” that previously supported Bitcoin and gold’s strength is noticeably cooling, and the speed of Bitcoin’s capital outflows has also accelerated significantly in recent times.

In a report led by Nikolaos Panigirtzoglou, Managing Director at JPMorgan, the research team said that after a brief inflow the previous week, gold ETFs were then heavily sold off in the week ending June 5, with net outflows of $20 billion; at the same time, outflows from Bitcoin spot ETFs have also gradually expanded over the past 4 weeks. The analysts noted:

“We observe that whether they are retail or institutional investors, they are broadly pulling back from the ‘Debasement Trade.’ This wave of capital flight has not stopped in the gold market, and in recent weeks, the Bitcoin market has even hit the accelerator.”

The so-called “Debasement Trade” refers to investors buying Bitcoin and gold in order to cope with broader risks such as geopolitical turmoil, persistently high inflation, a surge in government debt, and wavering confidence in fiat currencies—thereby diversifying away from a hedging approach that relies on a single U.S. dollar.

However, analysts found that in recent weeks, this hedging buying has quietly unraveled—whether considering ETFs, the futures market, or investors’ asset allocation positions.

Institutional Big Retreat: Long Positions Shrink, Short Positions Come Back Harder, Intensifying the Downward Trend

Not only are retail investors stopping, institutions are also continuing to reduce their exposure through the futures market. The report said that since the end of February this year, gold’s long positions have been shrinking steadily; and after the outbreak of the Middle East conflict, Bitcoin—long regarded as a main force behind the Debasement Trade—reversed course in early May, after which the trend became even more lackluster.

JPMorgan’s market momentum indicators also confirm this development. Gold investors have been cutting long positions since the end of February; Bitcoin initially benefited from short covering, but as of early May it still could not withstand heavy selling pressure and reversed downward. The research team added that the new short positions entering the market recently could further amplify gold’s decline.

In addition, the analysts tracked the funding allocation ratios of non-bank investors in Bitcoin and gold (relative to traditional assets such as stocks, bonds, and cash). The data shows that these hedging allocations had been rising steadily since mid-2023, but have now fallen sharply to the lowest level in March 2025.

JPMorgan pointed out that weakening liquidity in the ETF and futures markets is also adding to downward pressure on Bitcoin.

Image source: Bloomberg

Do Hedging Attributes Fail to Work? Bitcoin and Gold Are Increasingly Looking Like “Risk Assets”

The report also highlights a phenomenon that investors should be alert to: the linkage among market assets is changing.

Recently, the correlation between Bitcoin and the U.S. 10-year real Treasury yield has turned to “negative correlation,” which mirrors the trend of gold earlier this year. This means that in the current high-interest-rate environment, the opportunity cost of holding non-yielding assets keeps rising, putting heavy pressure on both gold and Bitcoin.

At the same time, the correlation between gold and the U.S. stock market’s S&P 500 index is also increasingly aligning with Bitcoin, showing a pattern that is positively correlated with the equities market. This indicates that compared with serving as “hedging tools” for mitigating portfolio risk, the recent performance of these two major assets has instead been more like “risk assets” that move in step with the broader market.

Cautious Outlook for the Second Half: Short-Term Pessimism Could Become a “Contrarian Bullish” Opportunity

The latest report largely continues JPMorgan’s earlier cautious stance toward digital assets. The analysts reiterated that for the cryptocurrency market to see a strong rebound in the second half of this year, two key conditions must be met:

• Greater Corporate Operational Transparency: digital asset reserve companies need to provide clearer guidance on how they will meet increasingly growing dividend issuance obligations, such as by rebuilding a dollar reserve fund to shore up confidence;
• A Regulatory Breakthrough: the U.S. crypto market structural bill must pass smoothly. However, JPMorgan’s current assessment puts the probability of the bill passing at below 50%.

Although the overall tone leans cautious, JPMorgan also pointed out in its report that when market sentiment is weak, in history it sometimes can become a “contrarian bullish signal”; in the long run, it may eventually turn out to be a “reverse-looking bullish” signal that offers a turning-point opportunity.

• This article is reprinted with permission from: BlockCast
• Original title: 《Loss of the Hedging Halo? JPMorgan: “Debasement Trade” Retreat Wave Hits Hard, Bitcoin Capital Outflows Accelerate》
• Original author: Block Sister Mel