Dollar loses ground: Bitcoin and gold benefit from ‘debasement trade’

The US dollar is losing ground and this is not going unnoticed on Wall Street. More and more large financial institutions are seeking protection in the so-called ‘debasement trade’: a strategy in which investors hedge against the dilution of fiat money. But why now, and what does this say about confidence in the financial system?

Investors flee to Bitcoin and gold

According to entrepreneur Anthony Pompliano, a change is underway among investors.

“There is no more discussion. People see that the dollar and bonds are going to have a hard time, and that Bitcoin (BTC) and gold will benefit from this,” he said last week in his well-known podcast. He calls it a realization that has existed among Bitcoiners and gold fans for years: “Nobody is ever going to stop printing money.”

The ‘debasement trade’ boils down to the idea that money slowly loses its value because central banks continue to print. Investors are therefore seeking refuge in scarce assets that retain their value better, such as gold and Bitcoin. That is not without reason, because gold has already risen by more than 50 percent this year and the Bitcoin price is up 23 percent.

Bitcoin designed as an ‘anti-debasement’ currency

According to Jeff Park, chief investment officer at ProCap BTC, the momentum is clear: “We wanted private wealth managers and financial advisors to include Bitcoin as an allocation in their portfolios. Now that’s finally happening.”

According to Brian Cubellis of Onramp Bitcoin, this development can be easily explained. Deficits are increasing, debts continue to grow and loose monetary policy keeps real interest rates low. As a result, investors are looking for something that will hold its value, and they find that in gold and Bitcoin.

Yet it goes further than a simple flight into precious metals or crypto. Enrique Ho, CFO of Blink Wallet, calls Bitcoin “anti-debasement by design.” The cryptocurrency has a fixed supply, transparent issuance and works without central control. According to him, it is the purest way to preserve capital in a world where money itself is constantly changing in value.

Dollar is losing ground on the world market

The value of the US dollar clearly shows that change. This can be tracked via the US Dollar Index (DXY), a measure that compares the dollar with a basket of other major currencies such as the euro and the yen. That index fell this year from 110 in January to a low of 96.3 in September, a decline of twelve percent.

For many analysts, the rise of the debasement trade shows that confidence in traditional currencies and policies is slowly eroding. Where investors used to blindly rely on the stability of the dollar and government bonds, they now look for protection outside the existing system.

This does not mean that the financial system will immediately falter, but it does mean that the role of alternative assets such as gold and Bitcoin is becoming increasingly important in a world where fiat money is slowly losing value.