- JPMorgan strategist Nikolaos Panigirtzoglou said synchronised May outflows from Bitcoin and gold ETFs signal a broad unwind of the debasement trade.
- Spot Bitcoin ETFs lost US$733.43 million on May 27 alone, with total May outflows running near US$2 billion.
- The bank tied the reversal to fading expectations of the US–Iran conflict, after earlier framing Bitcoin as “the primary representation of the debasement trade since the onset of the Iran conflict.”
Investment banking giant JPMorgan said the so-called “debasement trade” in Bitcoin (BTC) and gold is losing momentum, with synchronised ETF outflows and weaker CME futures positioning pointing to traders unwinding hedges tied to inflation and US–Iran tensions, according to a research note dated May 28.
Nikolaos Panigirtzoglou, a JPMorgan strategist on the bank’s Global Markets Strategy team, stated in the report that “Bitcoin had been the primary representation of the debasement trade since the onset of the Iran conflict,” but argued the trade has reached an inflection point.
“The market is telling us, through the blunt instrument of ETF flows, that the fear trade is losing its grip,” the note added.
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Synchronised ETF Outflows
Spot Bitcoin ETFs recorded US$733.43 million (AU$1.02 billion) of net outflows on May 27, capping a run of more than US$1 billion (AU$1.39 billion) in redemptions over two trading days. May outflows from US-listed spot Bitcoin funds total roughly US$2 billion (AU$2.78 billion), with BlackRock’s IBIT and Fidelity’s FBTC accounting for the bulk of the withdrawals.
Gold ETFs are following a similar pattern after a turbulent quarter. Global physically backed gold funds posted a record US$12 billion (AU$16.68 billion) in March outflows, recovered with about US$6.6 billion (AU$9.17 billion) of April inflows, and have seen renewed selling through May.
JPMorgan flagged that both assets are bleeding capital at the same time, characterising the move as a broad unwind rather than a rotation from gold into Bitcoin or vice versa.
The bank said the original surge in the debasement trade tracked the onset of the Iran conflict, and the May unwind coincides with fading expectations of a US–Iran confrontation and growing market discussion of a possible diplomatic resolution.
Keep in mind Panigirtzoglou had argued Bitcoin was taking market share from gold, supported by three consecutive months of inflows into spot Bitcoin ETFs while gold funds lagged after Iran-related outflows.
Read more: Bitcoin Stalls as ETF Outflows and Iran Deal Speculation Shake Crypto Markets
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