With the U.S. election approaching, JPMorgan analysts predict that a Donald Trump victory could further strengthen momentum for bitcoin, driven by what they call the "debasement trade" among retail investors.

"Retail investors appear to be embracing the 'debasement trade' in an even stronger manner by buying bitcoin and gold ETFs," JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, wrote in a report on Wednesday. "The retail impulse is also seen in meme and AI tokens the market cap of which has outperformed," the analysts noted.

Net inflows into spot bitcoin ETFs hit $1.3 billion over the past two days alone, bringing October's inflows to $4.4 billion so far. This surge marks the third-largest month of bitcoin ETF inflows since their launch in January, fueled by retail interest in alternative assets as a hedge against currency debasement, according to the analysts.

Institutional investors, on the other hand, have largely paused their bitcoin futures activity in recent weeks, the analysts said, citing their bitcoin futures position proxy based on cumulative open interest changes in CME bitcoin futures contracts, adjusted daily. "Bitcoin futures have become rather overbought creating some vulnerability going forward," the analysts said.

Gold ETFs have also seen sustained inflows, likely driven by retail investors, while institutional participation in gold futures has similarly paused, the analysts said. "Overall, to the extent a Trump win inspires retail investors to not only buy risk assets but to also further embrace the 'debasement trade', there could be additional upside for bitcoin and gold prices in a Trump win scenario," they concluded.

Earlier this month, JPMorgan analysts said they are bullish about the crypto market's potential in 2025, citing factors such as the growing debasement trade and the possible return of Donald Trump as U.S. president.

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