The "debasement trade," an investment strategy anticipating high inflation and a weakening US dollar, has regained prominence. This trade typically involves investing in scarce assets like gold and Bitcoin. Renewed interest in this strategy was triggered by Treasury Secretary Scott Bessent's August 19 announcement that the government would increase purchases of long-dated bonds, effective September 9, aiming to lower bond yields.
Following Bessent's announcement, Bitcoin's price surged by 22%. In contrast, the SPDR Gold Shares ETF (GLD) saw a 2% decline, indicating a split in the performance of these traditional and new inflation hedges. This divergence is notable given that Bitcoin's 90-day correlation with gold's price has significantly increased, rising from near zero in January to about 74% by September 9, suggesting that investors are increasingly viewing Bitcoin as a store-of-value asset similar to gold.
Wall Street is actively seeking new ways to participate in this debasement trade, with some institutional investors combining traditional assets like gold and commodity businesses with newer approaches, such as Bitcoin. For example, Bitwise Asset Management launched an ETF in January 2026 that includes at least 25% in spot gold, along with Bitcoin and mining stocks, to hedge against currency debasement. Similarly, MicroBit listed Hong Kong's first ETF holding both Bitcoin and gold on August 26. These developments highlight a growing institutional acceptance of Bitcoin as a potential hedge against dollar debasement, despite its relative newness compared to gold.
