JPM Sees Bitcoin Reach $165K by 2025-End as Dollar Debasement Trend Fuels Risk Rally in BTC and Gold

The US government shutdown has investors flocking to safe-haven or alternative assets like gold and bitcoin (BTC). Bitcoin prices reached a record high of over $125,000 (£93,049) per token while gold prices surged to an all-time high of close to $3,950 (£2,940) per ounce.

Market experts believe the government shutdown could push more money into safe-haven assets, a trend they are calling the 'debasement trade.'

'With many assets, including equities, gold and even collectables like Pokémon cards hitting all-time highs, it's no surprise Bitcoin is benefitting from the dollar debasement narrative,' FalconX's Joshua Lim told Bloomberg.

JPMorgan analysts said in a recent note to clients that the Bitcoin price could rise to $165,000 (£122,825) per token by year-end on a volatility-adjusted basis relative to gold, indicating significant upside if the 'debasement trade' continues to gain momentum.

'The familiar pattern of dollar debasement against alternative reserve assets amid Washington dysfunction,' according to the bank. 'Even if not as dramatic as gold, other precious metals have also rallied sharply and in a broad-based fashion,' akin to moves following the global financial crisis.

A debasement trade typically involves purchasing assets, such as gold or bitcoin, to hedge against the devaluation of fiat currencies like the US dollar.

JPMorgan described the trade as a response to long-term inflation concerns, mounting government deficits, questions on US Federal Reserve independence, geopolitical uncertainty, faltering trust in fiat currencies in emerging markets, and a broader move to diversify away from the greenback.

The bank explained that the valuation gap has swung from Bitcoin being $36,000 (£26,798) overvalued at the end of 2024 to being about $46,000 (£34,242) undervalued relative to volatility-adjusted gold levels today. 'This mechanical exercise thus could imply significant upside for bitcoin,' according to the note.

JPMorgan's forecast joins a series of bullish forecasts for bitcoin heading into the end of 2025, with many major firms and analysts targeting $200,000 (£148,879) per token. Citibank had a $132,000 (£98,260) target for Bitcoin by year-end and $181,000 (£134,736) in the next 12 months.

The surge in Bitcoin prices can also be attributed to the growing adoption of the coin by corporations. Public companies, led by Michael Saylor's Strategy, have been piling into BTC for years.

'The shutdown matters this time around,' said Geoff Kendrick of Standard Chartered. He added that BTC value could climb during this period and the crypto was 'in a different place' during the previous shutdown in 2018-2019, when it did not move in line with traditional risk assets.

Meanwhile, hundreds of central banks have been diversifying away from the US dollar and into gold since 2022, after the U.S. government weaponised the greenback to isolate Russia for invading Ukraine.

Official global gold reserves have reportedly increased by 1,000 tonnes over the past three years, reaching their highest levels in decades. This summer, the precious metal became the second-largest reserve asset, surpassing euro reserves.

While gold prices have almost tripled in the past three years, several analysts believe the rally is still in its early stages as retail demand has only just started to accelerate.

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