Bitcoin and gold ETFs bleed $1B as JPMorgan flags debasement trade retreat

Investors are abandoning the inflation-hedging playbook that dominated crypto and commodity markets for months, JPMorgan says.

Bitcoin and gold ETFs posted simultaneous outflows exceeding $1 billion in weekly periods during May, signaling a broad retreat from the debasement trade that had driven capital into scarce assets since early 2026.

"The debasement trade is unwinding as geopolitical tensions ease and investors rotate out of inflation hedges," Nikolaos Panigirtzoglou, a strategist at JPMorgan, said in a research note dated May 28.

Bitcoin ETFs recorded outflows of more than $1 billion during some weekly periods in May, with one Thursday session alone logging $145.64 million in redemptions, per Farside Investors data. Gold ETFs followed a parallel trajectory, bleeding capital in tandem — a pattern Panigirtzoglou said reflects a structural pullback from the entire hedging thesis rather than a rotation within it. The reversal was swift: Bitcoin ETFs had posted three consecutive months of inflows heading into May, a streak that had bolstered the case for spot bitcoin products as permanent institutional fixtures.

The coordinated outflows suggest the easing of US-Iran tensions and a hawkish turn from the Federal Reserve are reshaping the macro backdrop that made scarce assets attractive. With the Fed's April minutes showing several officials open to rate hikes if inflation fails to cool, the liquidity environment for risk assets — including crypto — is tightening. Bitcoin's next test sits at the $70,000 support level, a break below which could accelerate the unwind.

What the debasement trade was, and why it is reversing

The debasement trade is a bet that fiat currency will lose purchasing power as governments run large deficits and central banks print money. Investors hedge by buying assets with hard supply caps: gold, the centuries-old version, and bitcoin, the newer and more volatile cousin. Both had been beneficiaries of that fear throughout early 2026, with Bitcoin ETFs drawing inflows for three straight months and gold ETFs clawing back from losses tied to the Iran conflict earlier in the year.

The catalyst for the reversal, according to Panigirtzoglou, was easing expectations around US-Iran tensions. The same geopolitical anxiety that had fueled demand for scarce assets began to dissipate, and with it, the urgency to hold them. The parallel movement in both Bitcoin and gold ETF outflows is the key signal — when both decline together, it suggests a fundamental shift in the hedging thesis, not a tactical reallocation.

$2 billion in May outflows and what comes next

US spot-Bitcoin ETFs have now seen roughly $2 billion in net outflows in May, according to Farside Investors, even as US equities continue rallying on artificial intelligence optimism. The iShares Bitcoin Trust (IBIT) accounted for the largest share, posting approximately $528 million in net losses on a single Wednesday session that saw total crypto ETF outflows of $733 million.

The broader macro picture is compounding the pressure. Minutes from the Fed's April meeting showed policymakers growing more hawkish, with several officials indicating that rates could rise if inflation fails to cool. Markets are increasingly pricing in a prolonged restrictive policy, tightening liquidity conditions for digital assets and overall risk markets. For Bitcoin, the retreat from the debasement trade removes a key demand driver at a time when the macro tailwind is already fading.

This article is for informational purposes only and does not constitute investment advice.