Banking giant JPMorgan has projected that Bitcoin (BTC) could climb to around $165,000 on a volatility-adjusted basis relative to gold, highlighting significant upside potential if the debasement trade continues to gain momentum. At the time of publication, Bitcoin was trading around $119,000, meaning it would need to rise about 40% to match the scale of private gold holdings after adjusting for risk.
The debasement trade involves buying assets such as gold or Bitcoin to hedge against the devaluation of fiat currencies, driven by long-term inflation concerns, ballooning government deficits, questions about Federal Reserve independence, and waning trust in fiat currencies in some emerging markets. JPMorgan analysts, led by Nikolaos Panigirtzoglou, noted that flows into spot Bitcoin and gold ETFs have surged since late 2024, with retail investors driving much of the activity. Bitcoin ETFs initially outpaced gold earlier in the year, but gold ETF inflows have been catching up since August, narrowing the gap.
Institutional investors have also participated, mainly via Chicago Mercantile Exchange (CME) Bitcoin and gold futures, with the bank's proxy based on open interest showing institutions have been net buyers since 2024, though their momentum has recently lagged retail demand. The steep rise in gold prices over the past month has bolstered Bitcoin's relative appeal, as the Bitcoin-to-gold volatility ratio has drifted below 2.0, underscoring the view that Bitcoin remains undervalued relative to gold.
Separately, analyst Charlie Morris, Chief Investment Officer of ByteTree, explained that Bitcoin's rally is tied to gold, with a pattern of rotation between the two assets. He observed that when gold is bullish, Bitcoin tends to consolidate, and when gold cools, Bitcoin usually continues its upward trend. Historical data from the past two years shows that between January and April, BTC fell by approximately 30% while gold rose by 28%, and then BTC rallied 60% from its low while gold stagnated until August. Morris stated that with gold rising for seven consecutive weeks and Bitcoin stuck below $120,000, a pause in gold's rise could signal Bitcoin's next range breakout and a move to new records.
Morris emphasized that gold loves low interest rates and a weak economy, while Bitcoin prefers a strong economy, and if the correlation persists, a slowdown in gold could trigger Bitcoin's ascent. He believes this bullish reversal pattern will continue, as gold will eventually tire, paving the way for Bitcoin's rally.