The Dollar Debasement Trade: Why Investors Are Flocking to Gold and Bitcoin in 2025

The so-called "debasement trade" is a bet that government borrowing and money printing will erode the value of the U.S. dollar, and it's reshaping investment portfolios across Wall Street and Main Street alike. With gold surging past $4,000 per ounce and bitcoin breaking above $126,000 in October 2025, investors are sending a clear message: they're seeking alternatives to traditional fiat currencies.

If you've been wondering why precious metals and cryptocurrency are dominating financial headlines—or whether you should consider these assets for your own portfolio—this guide breaks down everything you need to know about the debasement trade and how to participate.

What Is the Dollar Debasement Trade?

The debasement trade is a bet that government borrowing and money printing will erode the value of the U.S. dollar, leading more investors to flock to safe-haven assets. Rather than holding cash or dollar-denominated assets, investors are rotating capital into "hard assets" with limited supply and independence from government monetary policy.

Growing distrust in the long-term stability and value of the U.S. dollar is driven by concerns over persistent inflation, ballooning national debt, and perceived fiscal indiscipline. As Citadel CEO Ken Griffin told Bloomberg, "Inflation is substantially above target" and "Gold is at record highs and the appreciation on other dollar substitutes ... in items like crypto, for example, is unbelievable".

The Numbers Behind the Trade: 2025's Dramatic Market Shifts

The magnitude of the debasement trade becomes clear when examining market performance in 2025:

Asset Performance Year-to-Date

• Gold: Up more than 50%, reaching historic highs above $4,000 per ounce
• Silver: Surged more than 60%, hitting $50, an all-time high
• Bitcoin: Registered gains approaching 30%, breaking above $126,000
• U.S. Dollar Index (DXY): Slumped more than 8%

The U.S. dollar ended the first half of 2025 with its biggest loss since 1973, marking the end of a 15-year bull cycle and prompting investors to seek protection elsewhere.

Why Investors Are Buying Gold: The Traditional Safe Haven

Gold has served as a store of value for thousands of years, and 2025 has reinforced its enduring appeal during economic uncertainty.

Key Drivers of Gold's Rally

1. Central Bank Demand: Global central banks now own more gold than they do U.S. Treasurys for the first time in nearly 30 years
2. Inflation Protection: "Commodities like gold act as a hedge against inflation, especially when inflation rates exceed interest rates. As the demand for gold generally increases during these times, investors' purchasing power rises with it"
3. De-dollarization: The dollar's share of global reserves has fallen below 47% by April 2025, accelerating the diversification trend
4. Policy Uncertainty: Rising inflation and debt, a weakening U.S. dollar, the government shutdown, and Wall Street's newest buzz, the "debasement trade," have all boosted assets beyond stocks and bonds

Gold has bested the performance of all major U.S. equity market indexes year-to-date, and over the past one-year and three-year periods.

Why Bitcoin Is Joining the Debasement Trade

While gold represents the traditional inflation hedge, Bitcoin is emerging as what many call "digital gold"—and it's attracting significant institutional attention.

Bitcoin's Unique Appeal

Institutions have realized that "no one is ever going to stop printing money", making Bitcoin's fixed supply of 21 million coins increasingly attractive. "People realize the dollar and bonds are going to have a lot of trouble moving forward, and therefore Bitcoin and gold are definitely benefiting", according to entrepreneur Anthony Pompliano.

The "Digital Gold" Narrative

A Bitcoin allocation could reflect a new, modern "cornerstone of financial security" that mirrors gold's role in the 20th century, according to Deutsche Bank analysts. The cryptocurrency offers advantages that physical gold cannot:

• Portability: Store millions in value with just a digital wallet
• Fixed Supply: Only 21 million BTC will ever exist
• Decentralization: No government or central bank controls it
• Divisibility: Easily divide into smaller units for transactions

Gold and bitcoin have climbed 51 percent and 31 percent in 2025, respectively, and both are the two top-performing assets of the year—a historic first.

How to Invest: Physical Gold vs. Gold ETFs

If you're convinced the debasement trade makes sense for your portfolio, you have several options for gold exposure.

Physical Gold

Advantages:

• Direct ownership and control
• No counterparty risk
• Tangible asset you can hold

Disadvantages:

• Storage and security costs
• Insurance expenses
• Less liquid than ETFs
• Verification and authentication challenges

Gold ETFs: The Convenient Alternative

Gold exchange-traded funds offer exposure to gold prices without the hassles of physical ownership. SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) remain heavyweight options for gold exposure.

iShares Gold Trust (IAU)

The iShares Gold Trust seeks to reflect generally the performance of the price of gold. Key features include:

• Expense Ratio: Among the lowest expense ratios at 0.25%
• Structure: Tracks the spot price of gold bullion by holding gold bars in a secure vault
• Liquidity: Among the most liquid ways to gain exposure to gold

SPDR Gold Shares (GLD)

SPDR Gold Shares is the largest gold ETF by assets under management at over $100 billion. While it carries a higher expense ratio at 0.4%, the ratio between SPDR Gold Shares' daily average bid-ask spread to its price was 0.006%, making the price of crossing the bid-ask spread virtually nothing.

Tax Considerations

The Internal Revenue Service treats physical gold as "collectibles," meaning long-term capital gains are taxed at a maximum rate of 28% instead of the 20% used for stocks and bonds. This applies to gold ETFs as well.

Bitcoin Investment Options

For Bitcoin exposure, investors can choose between:

1. Direct Purchase: Buy Bitcoin through exchanges like Coinbase, Kraken, or Gemini
2. Bitcoin ETFs: iShares Bitcoin Trust (IBIT) is seeing interest from those who want regular exposure
3. Bitcoin Futures: More complex instruments for sophisticated traders

The bitcoin ETF has recently been besting the biggest U.S. equity ETFs in weekly flows, showing strong institutional demand.

Expert Perspectives on the Debasement Trade

Wall Street's biggest names are taking notice of this shift:

Paul Tudor Jones, the billionaire hedge fund manager who predicted the 1987 crash, told CNBC he would own a combination of gold, cryptocurrencies and Nasdaq tech stocks between now and the end of the year.

Ken Griffin, Citadel CEO, warned that "substantial capital is moving away from the dollar as investors seek to de-dollarize or reduce exposure to US sovereign risk".

"This whole debasement trade is benefiting gold," said Amplify ETFs CEO Christian Magoon.

Portfolio Diversification Strategy

Financial experts recommend a balanced approach rather than going all-in on any single asset.

"In the current environment, it is recommended to invest about 20% in alternatives such as precious metals and cryptos", according to FxPro market analyst Alex Kuptsikevich.

Sample Allocation for Inflation Protection:

• 60%: Traditional stocks and bonds
• 20%: Gold (physical or ETFs)
• 10%: Bitcoin and select cryptocurrencies
• 10%: Other alternative assets (real estate, commodities)

This approach provides diversification while maintaining exposure to the debasement trade thesis.

Risks and Considerations

While the debasement trade presents compelling opportunities, investors should understand the risks:

Gold Risks

• Interest Rate Sensitivity: Gold often declines when real interest rates rise
• No Yield: Unlike stocks or bonds, gold generates no income
• Dollar Strength: A reversal in dollar weakness could pressure gold prices

Bitcoin Risks

• Extreme Volatility: Bitcoin can drop 20-30% in days
• Regulatory Uncertainty: Government policies could impact access and taxation
• Technological Risks: Security breaches, lost keys, exchange failures
• Correlation with Stocks: Bitcoin's price was found to be strongly correlated with stock prices, which may limit its safe-haven characteristics

Looking Ahead: What to Expect Through Late 2025

Morgan Stanley Research estimates the U.S. currency could lose another 10% by the end of 2026, suggesting the debasement trade may have more room to run.

Goldman Sachs Research predicts gold will reach $3,700 per ounce by the end of 2025, while some forecasts suggest ambitious forecasts even suggesting a price of $10,000 by the end of the decade.

For Bitcoin, institutional adoption continues accelerating, with central banks expected to hold significant amounts of Bitcoin and gold by 2030 according to Deutsche Bank.

The Bottom Line: Is the Debasement Trade Right for You?

Buying into gold and bitcoin is as much a bet on those assets maintaining their value as it is an expectation for the U.S. dollar to depreciate over time.

The debasement trade represents a fundamental shift in how investors view currency risk and portfolio protection. Whether you choose physical gold, gold ETFs like iShares Gold Trust (IAU), Bitcoin, or a combination of these assets, the key is understanding your risk tolerance and investment timeline.

As investor Anthony Pompliano noted, "Investors are scared that governments around the world have created too much debt, therefore nation states and central banks have to debase their currency in order to avoid default".

The question isn't whether currency debasement will continue—most experts agree it will. The question is how you'll protect your wealth in response.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in gold, Bitcoin, and other assets carries risks, including potential loss of principal. Consult with a qualified financial advisor before making investment decisions.

‍