Is the "debasement trade" back in play?

The Roundup is Rhino’s weekly read for people who'd rather build a process than predict a price.

Investors are giving gold and Bitcoin a push for exactly the same reason. 

Last week, Bitcoin exchange-traded funds took in a whopping $3.2 billion, their largest weekly intake since October 2025. Gold funds, meanwhile, pulled in an even bigger $7.3 billion, marking a 10-month high.

Both four-week averages are now at their highest levels since last autumn. 

Analysts are now claiming that the “debasement trade” — a term coined by JPMorgan analysts in 2024 to describe how “rising geopolitical tensions and the coming [U.S.] election” could favor both gold and Bitcoin — is underway.

The debasement trade is a bet against a government’s ability to manage their finances. Investors pull away from sovereign debt and fiat currencies, fearful that their value will erode as governments address massive debt burdens by simply printing more money.

But what’s making investors roll into gold and Bitcoin?

For one, the 40-year era of falling interest rates has ended, wrote Bernstein analysts in a note last week. U.S. sovereign debt has exceeded $40 trillion, and servicing it has become an ever-larger problem. Higher yields means higher interest costs, which then turn into bigger government deficits, and that spirals into more borrowing. 

You can already see the shift in what types of assets people are trading.

As Bloomberg’s ETF expert, Eric Balchunas, noted on X last week, the “debasement trade is starting to replace AI mania,” with gold and Bitcoin muscling their way back into the ten most-traded ETFs on the stock market. 

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Meanwhile, there’s a more immediate force at work than long-run debasement, argued crypto angel investor Arthur Hayes. 

The U.S. Treasury can add more money to the financial system without the Fed cutting rates simply by changing how it borrows, and buying back some longer-term debt to help keep yields lower.

That’s what spurred Bitcoin’s 25% spike last week. 

Once the Treasury stops injecting new capital, that liquidity has to go somewhere, and the most price-sensitive asset on earth is Bitcoin, wrote Hayes.

But even Hayes — who’s about as bullish as it gets — offers one bit of advice that’s worth taking to heart. Unless you trade full-time, and truly know what you’re doing, don’t use leverage. Just buy what you can hold, and sit on your holdings.

There’s skepticism

Not everyone’s convinced about the “debasement trade,” however.

In fact, Carlos Guzmán, research analyst at GSR, told The Roundup that he’s skeptical of the debasement trade at all in the short term. 

“The recent moves have all been by the U.S. Treasury, which is limited by what it can do as it cannot ultimately expand the money supply by itself,” Guzmán said. “That ultimate control over the money supply rests with the U.S. Fed, and all of the recent signs from the latter challenge the debasement trade narrative.”

Guzmán is referring to hawkish comments from Chair Warsh at Jackson Hole, hot PCE inflation, and rate-hike odds for September jumping to 65% from 40%. 

In that environment, gold fell about 4% last week while Bitcoin remained flat. If this were purely the debasement trade, he argued, Bitcoin should have dropped with gold.

Price targets

Still, Bernstein analysts put a lofty $150,000 price tag on Bitcoin by 2027. 

But whether Bitcoin hits that, or any other target, is anybody’s guess. 

In any case, you don’t need the price call to be right for the thesis to matter. If the debasement trade argument is able to hold its own ground, then the sensible response isn’t really to go out chasing last week’s $3.2 billion of inflows. 

It’s to own hard assets like Bitcoin that you can hold no matter how the price moves in the short term.

How you hold Bitcoin decides whether you can hold it when it counts. Our new 33-page report breaks down ETFs, exchanges, and self-custody, including the fees, the risks, and what history shows when the middleman fails. 

The free guide features exclusive interviews with Lyn Alden, $270 billion financial advisor Ric Edelman, and Bitwise’s Ryan Rasmussen. 

Chat next week,

Rhino Research