JPMorgan: Cryptocurrency rebound unlikely to last, Trump presidency would benefit Bitcoin and gold

On July 21st, Morgan Stanley analysts stated that any rebound in cryptocurrency prices could be tactical (temporary and strategic) rather than the beginning of a sustained upward trend. They pointed out that Bitcoin's current price is around $67,500, higher compared to its production cost of about $43,000 and the volatility-adjusted gold price (around $53,000).

In a report on Thursday, Morgan Stanley analysts wrote that the difference between the price of Bitcoin and the volatility-adjusted gold price at Morgan Stanley "suggests mean reversion towards zero line which limits the potential for long-term upside in Bitcoin prices."

The analysts reiterated that with reduced liquidation volume after July, cryptocurrencies are expected to rebound starting from August. They noted that recent weakness in Bitcoin futures was due to liquidations by Gemini and Mt. Gox creditors as well as Germany selling confiscated bitcoins. The analysts mentioned these liquidations may fade post-July and anticipate Bitcoin futures to rebound from August aligning with recent gains in gold futures.

The analysts stated: "We believe momentum traders such as commodity trading advisors played an important role in driving gold futures higher. Momentum signals for gold surged into overbought territory last seen back in April last year."

Morgan Stanley analysts suggested that if Trump were to be re-elected president again, it could benefit gold. They mentioned some investors believe Trump is more favorable towards cryptocurrency companies and regulations compared to the current Biden administration. Additionally, they added Trump's potential trade policies might lead emerging market central banks like China's central bank to increase diversification investments into gold.