The “debasement trade,” a strategy championed by both retail and institutional investors betting on hard assets like gold and Bitcoin to hedge against fiat currency decline, is under fresh scrutiny after a dramatic divergence in performance.
On October 10, the “Black Friday Crypto Crash” wiped out over $19 billion in leveraged positions, sending Bitcoin (BTC) tumbling, while gold surged to record highs, breaching the $4,000 mark.
SponsoredGold Surges as Safe-Haven Demand Skyrockets
Recently, concerns over inflation and Federal Reserve independence fueled the move toward hard assets. The shift was so marked that JPMorgan analysts coined the term “debasement trade.”
While the narrative around fiat debasement has pushed investors toward gold and Bitcoin, Nic Puckrin, crypto analyst and co-founder of The Coin Bureau, warns that many may be underestimating the potential for a short-term dollar rebound.
“Gold buying has accelerated this year, but global dollar-denominated debt is over $50 trillion. The world hasn’t weaned itself off the dollar yet, and that could disrupt anti-dollar trades if the greenback rallies unexpectedly,” he said.
He also noted that while the long-term trend may still favor devaluation, any short-term dollar spike could cause serious volatility in risk assets, Bitcoin included.
“Gold and Bitcoin remain strong long-term bets, but any unexpected spike [in the dollar] could cause a lot of pain,” Puckrin added.
However, gold’s move to record highs has reignited debate over whether Bitcoin still qualifies as a credible component of the debasement trade, or whether gold has decisively reclaimed its status as the only true safe haven.
Sponsored Sponsored“Bitcoin follows other risk assets… it’s not a safe haven store of value the way gold is. The world is going off the dollar standard and back onto a gold standard,” longtime Bitcoin skeptic Peter Schiff said in a recent podcast.
The comments come as gold surged above $4,000 per ounce in October, gaining 60% year to date and outpacing the broader market. According to Reuters, precious metals climbed as investors sought shelter amid dollar anxieties and economic uncertainty.
Bitcoin’s Bumpy Ride: Safe Haven or Risk Asset?
The $19 billion selloff in crypto came amid rising global tensions, including flare-ups in the trade war between China and the US and growing concern over US fiscal deficits. According to JPMorgan, the macro environment remains ripe for debasement-hedge strategies: rising inflation, mounting debt, and geopolitical fragmentation are all pressuring fiat systems.
But the sharp divergence in asset behavior, gold climbing to new highs while Bitcoin plunged double digits, has cast doubt on Bitcoin’s safe-haven credentials. Bitcoin was trading at $111,207 at press time, down 8% on the weekly chart — a sharp contrast to gold, which gained nearly 6% in the same period.
Sponsored“Debasement trade feels more meme than movement,” a skeptical trader posted on X, reflecting a growing chorus of investors who now see Bitcoin as more correlated with tech stocks than with inflation hedges.
Nevertheless, Bitcoin advocates aren’t giving up the narrative so easily. Paolo Ardoino, CEO of Tether, argues that gold and Bitcoin remain relevant as long-term stores of value.
“Bitcoin and gold will outlast any other currency,” Ardoino wrote on X, pointing to a future where both assets play complementary roles in hedging fiat risk.
Moreover, recent on-chain data also shows an uptick in BTC-gold correlation, suggesting investors may still be positioning them side by side in portfolios.
“BTC-Gold correlation is high; digital gold narrative still alive. Inflation hedge demand isn’t dead yet,” Cryptoquant CEO Ki Young Ju noted.
Persisting correlations signal that investors continue to view Bitcoin as an inflation hedge alongside gold.
Sponsored SponsoredHowever, critics like Schiff warn that institutional enthusiasm for Bitcoin may reverse.
“The biggest risk for Bitcoin is all the money that has piled into Bitcoin ETFs that came out of gold ETFs,” he said. “Many of those investors may go back to gold.”
He also cautioned about balance sheet stress among Bitcoin treasury companies, which may be forced to sell their holdings in a downturn, creating further price pressure.
Is the Debasement Trade Still Valid?
Despite the conflicting narratives, demand for assets outside the fiat system is accelerating. Whether that manifests through Bitcoin, gold, or both depends on the investor’s time horizon and risk appetite.
Gold continues to benefit from centuries of monetary legitimacy and institutional trust. Bitcoin, meanwhile, offers digital portability and fixed supply, but remains volatile and sentiment-driven.
