Investors are Making Long-Term Bets on Gold and Bitcoin

Investors are increasingly betting that currencies will decline in value by buying gold and bitcoin. This trend is here to stay, according to JPMorgan Chase, the largest US investment bank.

“The structural importance of gold and bitcoin in investors’ portfolios has grown as they seek protection against geopolitical risks and inflation,” the bank said, noting that the crypto market saw record capital inflows in 2024.

The so-called debasement trades are made by buying gold bullion and bitcoin. And there are several factors why this is done.

“Geopolitical uncertainty has increased significantly since 2022, there is high uncertainty about long-term inflation, and there are also concerns about debt depreciation as government budget deficits remain persistently high in major economies. These are just a few of the reasons,”

JPMorgan said.

Several prominent investors, including Paul Tudor Jones and Stanley Druckenmiller, share JPMorgan’s sentiment and are heavily invested in commodities and gold. Druckenmiller announced last February that he had sold all of his technology stocks and bought shares in the world’s two largest gold miners. Jones has invested in both gold as a precious metal and bitcoin. “The Big Short” investors, who bet on the great housing market crash before the 2008 financial crisis, have also made big bets on gold.

US Government or States Create Bitcoin Reserve

Asset management firm Vaneck predicted in December that the US federal government or at least one US state – Pennsylvania, Florida or Texas – would create its own bitcoin reserve.

According to JPMorgan, interest in investing in bitcoin has skyrocketed to record highs. While there were $18 billion in open positions in bitcoin futures in January, that had grown to $55 billion by December. The assets of bitcoin exchange-traded funds surpassed $100 billion for the first time in November last year, according to Bloomberg data.

The flow of investors’ money into gold is well reflected in the graph below, which shows how much gold represents in investors’ portfolios compared to stocks, bonds and cash. This includes investors who are not banks. This includes central banks and private investors who hold gold coins and bars or exchange-traded funds (ETFs) backed by physical gold.

Key Takeaways

The growing trend of investing in gold and bitcoin underscores a shift in how investors are navigating an era marked by geopolitical uncertainty, inflation concerns, and fiscal challenges. As traditional currencies face increasing skepticism, gold and bitcoin have emerged as favoured assets in an investment portfolio for preserving wealth and hedging against economic volatility in the short term and long term.

Prominent investors and financial institutions alike recognise the structural importance of these assets, as evidenced by record inflows into the crypto market and significant investments in gold. The evolving landscape, including potential moves by governments or states to create bitcoin reserves, highlights the staying power of these alternative investments.

The bottom line is this dual focus on gold and bitcoin represents a broader rethinking of traditional portfolio strategies, emphasising resilience and long-term security. As global economic challenges persist, it is clear that gold investments and bitcoin will continue to play a critical role in shaping the future of wealth management and investment strategies.