Could a Trump Victory Further Boost Bitcoin and Gold Prices?

Could a Trump Victory Further Boost Bitcoin and Gold Prices?According to Nikolaos Panigirtzoglou, an analyst at JPMorgan, Bitcoin and gold could see further gains if former President Trump wins the US presidential election next week. Panigirtzoglou notes that retail investors are engaging in "debasement trades," buying Bitcoin and gold exchange-traded funds (ETFs) in the lead-up to the US presidential election on November 5th

Could a Trump Victory Further Boost Bitcoin and Gold Prices?

According to Nikolaos Panigirtzoglou, an analyst at JPMorgan, Bitcoin and gold could see further gains if former President Trump wins the US presidential election next week. Panigirtzoglou notes that retail investors are engaging in "debasement trades," buying Bitcoin and gold exchange-traded funds (ETFs) in the lead-up to the US presidential election on November 5th.

"Debasement trades" refer to an investment strategy where investors purchase assets like gold and Bitcoin to hedge against the risk of currency devaluation. When governments increase the money supply, implement loose monetary policies, or rack up large fiscal deficits, it can lead to a decrease in the purchasing power of the currency. In such situations, investors typically turn to assets perceived as stores of value.

Panigirtzoglou argues, "If Trump were to win, that would not only incentivize retail investors to buy risk assets, but it would further fuel the 'debasement trade,' leading to potential additional upside for Bitcoin and gold prices in a Trump victory scenario."

The race between Trump and Democratic nominee Kamala Harris is exceptionally tight. Many investors are concerned about the US government's deficit situation, which increased by 8% in the 2024 fiscal year, reaching $1.8 trillion, with both candidates pledging further tax cuts.

As a result, many investors see Bitcoin and gold as hedges against potential fiscal and monetary policies that could weaken the dollar and drive inflation higher.

Panigirtzoglou points out that spot Bitcoin ETFs attracted $1.3 billion in fresh investment funds over the past two days. This brings the total inflows for October to $4.4 billion, marking the third-largest month of net inflows for Bitcoin funds since their launch in January. Meanwhile, meme and AI-related tokens have outperformed the overall crypto market on the back of retail investor fervor.

However, Panigirtzoglou also states that institutional investors appear to be on hold in the past two weeks, based on the change in cumulative open interest in Chicago Mercantile Exchange (CME) Bitcoin futures. Bitcoin futures have become "quite overbought" and could face future vulnerability.

The situation with gold is similar, with retail investors continuing to buy gold ETFs, while gold futures activity shows signs of stagnation.

Overall, while the market is divided on the potential impact of a Trump win, JPMorgan believes that a Trump victory could further fuel retail investor "debasement trades," thereby providing additional upside potential for Bitcoin and gold.

It is important to note that market forecasts are always uncertain. Investment decisions should be based on your own risk tolerance and investment goals and should not rely solely on the opinions of any single analyst.