Precious Metals and Bitcoin Rise on the Back of Debasement Trades
A financial strategy in which investors allocate funds to assets such as Bitcoin and gold as a hedge against the devaluation of fiat currencies is known as a debasement trade. Key drivers include rising sovereign or government debt, geopolitical instability, and inflation. Experts note that investors have been selling major currencies and moving towards alternative assets such as gold (both physical and ETF), silver, Bitcoin, and even certain collectables such as Pokémon cards, which recently reached an all-time high.
Data released indicates that investors have added momentum to debasement trades due to growing concerns over fiscal challenges affecting many of the world’s largest economies, several of which are struggling under an expanding burden of debt. Analysts also highlight that political instability within these economies has further encouraged investors to pursue debasement hedges by purchasing gold, Bitcoin, and other crypto assets, particularly as the US dollar, Japanese yen, and euro face mounting fiscal and political pressures.
Experts suggest that one of the main reasons investors are rebalancing their portfolios is the rising debt levels in countries such as the United States, Japan, and across the Eurozone. These nations are finding it increasingly difficult to manage their debt piles, which in turn has enhanced the appeal of debasement trades. Gold opened today, surpassing USD 4,000 per ounce, a new record, as it continues to demonstrate its role as a safe haven amid economic and geopolitical uncertainty. Recent data also revealed that Q3 saw the largest global gold ETF monthly inflow on record at USD 17 billion, resulting in the strongest quarter ever, totalling USD 26 billion.
On the Bitcoin front, the cryptocurrency has risen steadily over the past year, driven largely by President Trump’s introduction of crypto-friendly legislation. However, the United States is grappling with a massive debt load, standing at USD 37.88 trillion as of the close of business on 30th September 2025 and still climbing. The ongoing US government shutdown has also acted as a strong buy signal for Bitcoin, much of it linked to debasement-related transactions.
Indeed, on Sunday 5th October Bitcoin reached USD 125,689, surpassing its previous record set on 14th August this year, driven primarily through Bitcoin ETFs. Data shows the coin is up 30% for the first three quarters of the year. Yesterday, 6th October, Bitcoin hit another record of USD 126,279 with the US dollar having weakened approximately 30% against the cryptocurrency this year. Several Wall Street analysts now predict Bitcoin will reach between USD 160,000 and USD 180,000 by the close of business on 31st December 2025.
Analysts advise that investors engaging in or considering debasement trades need only to look at France for an example of why hedging has become increasingly common. Newly appointed Prime Minister Sebastian Lecornu lasted only 26 days in office, surpassing the brevity of former UK Prime Minister Liz Truss’s record by 23 days. The French leader did not even manage to deliver an inaugural address to parliament, let alone present a budget that could achieve cross-party support.
Commentators suggest that debasement trading will continue an upper trajectory, as Europe contends with instability in France and beyond. Japan has also unsettled markets with a newly elected pro-stimulus Prime Minister and concerns over further debt expansion. In the United Kingdom, the Chancellor is preparing a budget that many expect to be highly contentious. Meanwhile, in the United States, already burdened by an out-of-control debt pile, a prolonged government shutdown, and a President seeking to assert influence over the Federal Reserve, the pressure continues to mount.
