Wall Street Sees Debasement Trade Revival, Boosting Bitcoin Hopes

Wall Street investors are revisiting the 'debasement trade' - investment opportunities that could thrive if the US government prints more money and allows inflation to rise.

The conversation has picked up again after a few quarters of quietude, with Treasury Secretary Scott Bessent announcing on Aug. 19 that the government would expand its purchases of long-dated bonds, effective Sept. 9.

This move artificially keeps bond yields lower, making investors believe the risk of currency debasement is rising rather than falling. Bitcoin has surged 22% since Bessent's announcement, while gold, as measured by the SPDR Gold Shares ETF (GLD), is down 2%, suggesting it isn't seeing the same upside amid rising inflation expectations.

The correlation between Bitcoin and gold has risen above 70%, with Grayscale reporting that Bitcoin's 90-day correlation with gold's price had increased to around 74% as of Sept. 9.