Does the Bitcoin 'Debasement Trade' Narrative Still Hold Up After the Crash?

In brief

Bitcoin hit a new all-time high last week, before plunging following President Trump's tariff announcements.
It has recovered slightly, while gold has already jumped to a new high this week.
Bitcoin and gold will continue to be bought by traders to hedge against currency debasement, experts told Decrypt.

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Bitcoin had been on a roll, hitting a new high of over $126,000 at the start of last week. But then on Friday, markets suffered a shock following the latest Trump trade war move: A threat of "massive" new tariffs on China.

Following President Trump's social media post, the result was nothing short of catastrophic, with the largest single-day wipeout in history—over $19 billion in largely leveraged crypto futures positions liquidated.

Bitcoin's price nosedived—albeit briefly—to under $110,000. It has since partially recovered, and was recently sitting at $113,494, according to CoinGecko. Gold, meanwhile, broke a new record on Monday of $4,099 per ounce.

It begs the question: Does the so-called debasement trade with Bitcoin and crypto still hold up?

Fears of excessive government debt and money printing have made alternative assets more attractive to investors. Digital assets had this month been one choice with said trade, with investors buying up gold, Bitcoin, and stocks as a way to hedge against currency debasement.

Despite the flash crash on Friday and only modest recovery since, experts told Decrypt that Bitcoin—and other digital coins—still have room to run as part of the trade.

"I think the [debasement] trade has another 10 years," said Amberdata Director of Derivatives Greg Magadini. "We have global inflation, which makes owning U.S. dollars and long-date treasuries more risky," he added, claiming that such a situation would benefit Bitcoin in the future.

Bitcoin has in the past benefited when the Fed has an expansionary monetary policy. When interest rates dropped to zero during the Covid-19 pandemic, the price of the leading cryptocurrency shot to new highs.

The U.S. central bank aggressively hiked interest rates, but is now slashing them again. Pepperstone research strategist Dilin Wu told Decrypt that unless rates remain high, the debasement trade will continue.

"In my view, the only factors likely to end this cycle are sustained rises in real interest rates and a return to fiscal discipline," she said.

"If real rates climb significantly and persist, the dollar strengthens over the long term, or there's a clear outflow of institutional funds—such as large ETF withdrawals—Bitcoin's role as a debasement hedge would be repriced," she added. "Absent these conditions, the upside momentum for Bitcoin remains very much intact."

So, what about other coins and tokens? While Bitcoin remains 10% below its all-time high following the Friday crash, other coins and tokens have suffered far more: Solana and XRP, the fifth- and sixth-biggest coins, respectively, have partially recovered from their price plunges last week but both remain over 30% lower than the new highs they touched earlier this year.

Not to fear, Grayscale Head of Research Zach Pandl told Decrypt—if the debasement trade continues, then major altcoin prices should continue to rise.

"It may take a few days for crypto markets to recover from the washout of leveraged trader positioning," he said, "but we continue to think dips will be temporary and that many tokens are on a path to new highs."