J.P. Morgan suggests that rising geopolitical risk could prompt investors to adopt a "depreciation trade" strategy, favoring gold and Bitcoin as safe-haven assets.

(Although it’s strange, for two years we’ve seen how bitcoin is being poured very heavily on geopolitics) 🧐🧐🧐

However, recent analysis from CryptoQuant shows that while gold prices are rising in response to falling US Treasury yields and increased geopolitical risk, Bitcoin is not experiencing a similar rise.

J.P. Morgan analysts suggest that rising geopolitical tensions and the November presidential election are pushing investors toward safe-haven assets like gold and bitcoin in what they call a "debasement trade."

“Rising geopolitical tensions and the upcoming U.S. elections are likely to reinforce what some investors are calling the ‘depreciation trade,’ thereby favoring both gold and Bitcoin,” J.P. Morgan Global Markets Strategy analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole and Krutik P. Mehta said in a note on Thursday.

While gold initially reacted more mutedly to recent geopolitical events, its price has risen sharply over the past quarter, approaching $2,700 on Sept. 26, analysts added.

"This rise in gold prices was driven by a 4-5% dollar decline and a significant 50-80 basis point fall in real Treasury yields. However, the rise in gold prices was greater than what these factors alone would have suggested, suggesting a resumption of the 'depreciation trade,'" the analysts said.

Thursday's note said this "depreciation trade" is driven by a combination of factors, including heightened geopolitical uncertainty from 2022 onwards, persistent inflation concerns, large government deficits in major economies and declining confidence in fiat currencies, particularly in some emerging markets.

A recent post by CryptoQuant on X reflected this sentiment, highlighting historical trends where lower US Treasury yields have driven up gold prices.

“In 2008, as 13-week Treasury bill yields declined, gold prices soared from $590 an ounce to a peak of $1,900 an ounce by 2011,” the post reads. “A similar trend is playing out now, with gold rising from $2,000 to nearly $2,700. Bitcoin, often seen as ‘digital gold,’ may follow this pattern.”

However, CryptoQuant analyst J.A. Maartun told The Block that despite the current decline in yields and expansion of the M2 money supply, “gold is already benefiting from these circumstances while Bitcoin is not, leading to the current negative correlation between Bitcoin and gold.”

Let's summarize here are 4 factors for Bitcoin growth:

1️⃣ Growing tensions in the world since 2022

2️⃣ increased inflation concerns

3️⃣ budget deficits of developed countries

4️⃣ a sharp decline in confidence in fiat currencies