Revisiting the 2025 Debasement Trade

The U.S. national debt has surpassed $37 trillion, reigniting the “debasement trade” as investors seek scarce assets to hedge against fiscal strain and currency dilution. Persistent deficits, rising money supply, and warnings from voices like Ray Dalio have renewed focus on gold and Bitcoin as alternative stores of value. While gold continues to lead performance this year, Bitcoin’s rising correlation and ETF inflows suggest a convergence may be underway.

Key Points

Debt Surge Drives Safe Havens

With U.S. debt above $37T, investors are turning to gold and Bitcoin ETFs as inflation and deficit hedges. Global gold ETF inflows have reached $57B YTD, while IBIT alone has attracted $9B+, highlighting renewed demand for non-sovereign assets.

Gold Outpaces, Bitcoin Catches Up

Gold’s 51% YTD gain to $4,015/oz leads, while Bitcoin’s 26% rise to ~$120,000 shows room to run. Correlation between the two has climbed to ~0.32, signaling alignment in the “scarcity trade.” JPMorgan projects Bitcoin could reach $165,000 by year-end if ETF momentum persists.

Balanced Allocation Is Key

For advisors, a 5–10% allocation split 60/40 gold-to-Bitcoin offers a measured hedge. Dollar-cost-averaging helps smooth Bitcoin’s volatility, while gold anchors portfolio stability.

The Debt Dilemma

The U.S. debt load has jumped from $33T in late 2023 to over $37T by October 2025, with annual deficits topping $1T. Without reform, debt could expand another $21T by 2049, raising long-term concerns about inflation and dollar erosion. As Dalio and others warn of structural fiscal risk, investors are shifting toward non-sovereign, scarce assets that can preserve purchasing power. The debasement trade—owning gold and Bitcoin—has become a tactical and strategic theme for both retail and institutional portfolios.

Gold’s Track Record

Gold remains the cornerstone of the debasement hedge. Up 51% YTD, it has outperformed historical averages, supported by central bank buying and safe-haven demand during fiscal and geopolitical uncertainty. With a $27.1T market cap and 1,075% total return since 2000, gold’s role as a tangible, supply-limited asset remains unrivaled. For most investors, GLD and similar ETFs offer a straightforward way to capture exposure with low volatility and dollar diversification.

Bitcoin’s Role as Digital Gold

Bitcoin, defined by its fixed 21M coin supply, has climbed to around $120,000 in 2025, advancing 26% YTD. While lagging gold, Bitcoin’s strengthening 0.32 correlation underscores its growing alignment as a digital scarcity hedge. ETF inflows, rising institutional adoption, and narratives around monetary debasement support forecasts of further upside. Yet Bitcoin’s higher beta means greater volatility, amplifying both opportunity and risk. Gold remains the stabilizer; Bitcoin the accelerator. Together, they offer balance in a world of expanding fiat supply.

Investor Framework

Profile	Allocation Range	Blend
Conservative	1–5%	80/20 Gold–Bitcoin
Moderate	5–10%	60/40 Gold–Bitcoin
Aggressive	10–15%	50/50 Gold–Bitcoin

Dollar-cost-averaging helps manage timing risk, and disciplined rebalancing preserves intent as volatility unfolds.

Bottom Line

The debt-driven debasement cycle reinforces the appeal of scarce assets. Gold continues to lead, but Bitcoin’s structural tailwinds—ETF inflows, liquidity growth, and macro convergence—suggest it may be next in line. For advisors, this is a moment to refine frameworks and prepare clients for a dual-asset hedge that’s both timeless and transformative.