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JP Morgan analysts forecast that Bitcoin will outperform gold for the remainder of the year. This is attributed to a change in the “debasement trade” strategy, where buying gold and Bitcoin as a hedge against weakening currencies has become a zero-sum game by 2025.
Gold prices had been on the rise while Bitcoin was declining, but this trend reversed in recent months. Since reaching a peak in April, gold prices have fallen, whereas Bitcoin has experienced gains, influenced by funds moving out of gold ETFs and into Bitcoin and crypto funds.
New Legislative Developments
New legislative developments in the US also play a role, with New Hampshire passing a bill allowing up to 10% of public funds to be invested in Bitcoin and precious metals. Similarly, Arizona has enacted comparable legislation. Such state-level decisions to invest in Bitcoin may offer a prolonged positive effect, potentially impacting market dynamics.
What the current data tells us, quite plainly, is that we are observing a rotation of capital rather than the introduction of new liquidity into alternative assets. Gold’s initial rise, followed by a steady drawdown post-April, has taken place alongside a clear uptick in Bitcoin interest, particularly through institutional vehicles rather than retail-driven momentum. This comes amid steady outflows from gold-backed exchange-traded products, with those resources being redirected, in measurable quantities, into cryptocurrency-linked funds.
The analysts at JP Morgan have made it clear: they expect Bitcoin to outperform gold through the end of the year. This isn’t grounded in sentiment or speculation—it’s based on asset flows and changes in macro hedging strategies. The term “debasement trade” sums this up. Investors seeking to shield themselves from inflation or currency dilution historically held gold and, more recently, Bitcoin. But that hedge, once evenly spread across both instruments, appears to be tilting. By 2025, the strategy is expected to reach an inflection point; gains made in one may come at the direct cost of the other.
Shift in State Level Regulation
The shift in US state-level regulation offers more than just symbolism. With New Hampshire and Arizona creating legal frameworks for holding Bitcoin in public funds, the actions—while perhaps initially more cosmetic than impactful—lay the groundwork for longer-horizon allocations. This kind of public-sector exposure, however marginal at first, could change sentiment and pressure other states or institutions to follow. We know from past cycles that legislation adds a form of legitimacy that speculative interest alone cannot provide.
As traders, the most practical way to participate in this early realignment is by monitoring fund flow data on a weekly basis and reviewing relative performance against known macro variables. Gold, while traditionally less volatile than Bitcoin, has now underperformed in a shifting inflationary narrative. That underperformance isn’t playing out in price alone—it is visible in volume declines and lower implied volatility, increasingly making it a less attractive asset to hedge aggressive macro shifts.
Meanwhile, Bitcoin has continued to absorb capital not only from gold but also from other pockets within traditional risk assets. That movement is no longer episodic; it’s part of a broader shift wherein institutions that once viewed gold as a necessary allocation are now willing—or at least preparing—to substitute it. That doesn’t suggest a disappearance or abandonment of gold as an asset class, but it does pose questions around its role going forward, particularly when considering potential correlation to monetary policy paths.
We should also look beyond the headlines and observe how positioning is shaping up across derivatives markets. Open interest in Bitcoin futures has seen steady expansion, while gold’s derivatives market has seen a flattening in net speculative positioning. This divergence gives us a visible signal of intent among sophisticated market participants. It tells us to be alert—not to broad sentiment, but to actual risk placements made by those with longer investment timelines.
There is also a behavioural aspect at play now. Decision-makers from institutions tend to look for permission to act, often in the form of regulatory cover or peer participation. The fact that states are beginning to accept Bitcoin as viable within fund portfolios allows these types of investors to justify changes to their mandates. When we witness institutional entrants buying Bitcoin-linked products in meaningful size concurrently with gold ETF outflows, we’re looking at a recalibration that has clear directionality.
In the coming weeks, it would be practical to avoid overexposure to gold volatility without confirmation of a rebound in both price and institutional demand. At the same time, derivative positioning in Bitcoin—particularly in longer-dated contracts—could present entry points with asymmetrical risk, especially in scenarios where liquidity persists and fiat-hedging themes swell further. That said, price targets matter far less than understanding where capital is willing to commit in size.
Positioning, as always, should reflect asymmetry. We need to adjust not on headlines, but through close reading of flows and market depth. The theme is still developing, but the market conviction reflected in data so far points very clearly in one direction.
