The debasement trade, where investors flee the dollar and major currencies for gold, bitcoin and other alternative assets, is making a comeback following the Treasury’s efforts this week to curb borrowing costs.
After months of trading in a tight range, bitcoin has rallied sharply since the Treasury Department announced an expanded bond buyback program on Wednesday. The largest cryptocurrency gained 22% this week, its best weekly performance in more than two years. Gold advanced 5.6%, while the dollar slid, extending its decline after recent government interventions to support the Japanese yen.
“The Treasury announcement for support in the long bonds is a clarion call to the market and a form of easing that crypto has historically always loved,” said Joshua Lim, global co-head of markets at trading firm FalconX. “Bitcoin will always be a debasement hedge.”