The Shift towards Debasement Trade is Clear, Traditional Finance Recognizes It: Industry Leaders

Financial institutions are increasingly recognizing the concept of the “debasement trade” in light of the declining value of the US dollar, a shift likely to result in significant upward trends for assets like Bitcoin and gold.

Institutions now have a strategy known as the “debasement trade,” a perspective touted by entrepreneur Anthony Pompliano during a podcast this Thursday. He highlights this notion aligns with what advocates of gold and Bitcoin have argued for years, as institutions now grasp that monetary expansion via central banks is relentless.

“This now feels like there is no longer a debate about this. People realize the dollar and bonds are going to have a lot of trouble moving forward, and therefore Bitcoin and gold are definitely benefiting.” — Anthony Pompliano

[Translation: People are starting to understand that traditional currencies are faltering, and this is leading to a surge in Bitcoin and gold prices.]

The debasement trade symbolizes an investment tactic relying on the forecast that fiat currencies will dwindle in value over time due to central bank money printing. Investors are thus strategically moving into assets perceived to retain or enhance value during the diluting phase of conventional currency, such as gold, which has risen 50% this year, alongside Bitcoin.

“We’ve been wanting to see private wealth management and financial advisers come to embrace Bitcoin as an allocation [in portfolios],” remarked Jeff Park, Chief Investment Officer at ProCap BTC.

The Debasement Trade: The Underlying Force in Finance

Bitwise’s Chief Investment Officer, Matt Hougan, described the debasement trade as akin to “the dark matter of finance,” signifying its subtleness yet pervasive influence.

“Recognition of the ‘debasement trade’ is accelerating for a simple reason: deficits mount, debt stacks higher, and accommodative policy suppresses real yields.” — Brian Cubellis

[Translation: While debts and deficits are increasing, the policy supporting them is keeping nominal yields low, prompting awareness of the risks associated with fiat.]

“Investors who expect ongoing dilution look for a yardstick that will not change on them, and that search shows up across both gold and Bitcoin.”

Debasement fears fuelling crypto rally. Source: Bloomberg

Bitcoin: More than Just Digital Gold

Bitcoin’s role transcends that of mere digital gold, according to remarks from Enrique Ho, the CFO of Blink Wallet.

“It is anti-debasement by design: fixed supply, transparent issuance, and trustless verification.”

[Translation: Bitcoin’s unique characteristics position it contrary to the threats associated with currency debasement.]

“This is the debasement trade — and it will define the next decade.”

Ongoing US Dollar Debasement

The ongoing debasement of the US dollar is visibly captured by the US Dollar Index (DXY), which gauges the dollar’s performance against other currencies.

It has dropped approximately 12% this year, sliding from a peak of 110 in January to a three-year low of 96.3 in mid-September, before witnessing a slight recovery in October as reported by TradingView.

DXY has been in a downtrend for the past three years. Source: TradingView

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