Bitget App
Trade smarter
Open
HomepageSign up
Bitget>
News>
The Debasement Trade: Investors Flee Weakening Dollar

The Debasement Trade: Investors Flee Weakening Dollar

DailyCoin2025/10/14 20:44
By: DailyCoin
BTC-0.77%RSR+1.38%


In recent months, the conversation around fiat currency debasement, the gradual erosion of a currency’s purchasing power, has resurfaced across global markets, including crypto.

As central banks hint at rate cuts and governments expand deficit spending, investors are once again questioning the real value of the U.S. dollar, the backbone of global finance and the benchmark for most stablecoins.

What Is Currency Debasement?

The term debasement originally described the practice of reducing the precious metal content in coins to issue more currency without increasing real value.

Sponsored

Today, it describes the dilution of money’s purchasing power through excessive money creation or government borrowing.

When governments borrow heavily and central banks inject liquidity to sustain economic growth, more money chases the same amount of goods and assets, leading to inflation and, over time, a weaker currency.

Why Investors Are Talking About Dollar Risk

The renewed focus on debasement comes as major central banks, led by the U.S. Federal Reserve, signal potential rate cuts despite inflation remaining above target.

Meanwhile, federal budget deficits keep widening, forcing the government to issue more debt and effectively monetize spending through bond markets. Such policies undermine confidence in the fiat currencies as a long-term store of value. 

A weakening dollar effectively eases the real burden of outstanding national debt, making it easier for the government to manage. 

For individual investors, this has sparked a shift toward the “debasement trade”.  Simply speaking, they are shifting capital from fiat-denominated assets into scarce, hard assets like gold, Bitcoin, and real estate.

Markets Signal Growing Dollar Weakness

It’s not just the U.S. dollar that is losing value. Other fiat currencies, including the euro and Japanese yen, are also weakening. 

Against gold, these currencies buy progressively less. Economist Fabian Wintersberger notes that their purchasing power relative to gold declined sharply in September 2025.

Another way to visualize it:

It's not 'dollar-debasement,' it's fiat debasement. And it has accelerated in September. pic.twitter.com/IRMKHt9Cku

— Fabian Wintersberger (@f_wintersberger) October 8, 2025

Meanwhile, gold prices reached historic highs, surpassing $4,120 per ounce by mid-October as investors priced in the risk of fiat currency weakening.

Since 2018, both stocks and gold have risen in dollar terms, but economist Charles Gave argues that this is a monetary illusion caused by U.S. dollar debasement.

Assets themselves haven’t gained real value. The dollar has simply become weaker, making portfolios look bigger while purchasing power remains largely unchanged.

Since 2018, both stocks and gold have posted similar gains. On the surface, this looks like both assets are doing well.

But Charles Gave argues neither has actually risen. The gains simply reflect US dollar currency debasement.

Economists call this "monetary illusion." Your… pic.twitter.com/7qPmpnpc0a

— StableBread (@StableBread) October 10, 2025

The ‘debasement trade” has been happening for years, but most investors still aren’t paying attention, says market analyst Phil Rosen. 

According to him, in dollars, US assets are peaking, but in gold and Bitcoin, their value has drastically plummeted.

The "debasement trade" has been happening for years but most investors still aren't paying attention.

US stocks and home prices are breaking records in dollar terms but they've collapsed when denominated in gold and bitcoin. pic.twitter.com/Hekkt0AliG

— Phil Rosen (@philrosenn) October 6, 2025

Crypto Faces Dollar Debasement Risk

The crypto market, where most stablecoins, including the major ones USDC and USDT, are pegged to the U.S. dollar, cannot ignore the implications of dollar debasement.

If fiat loses value over time, the trust foundation of stablecoins, and by extension much of the crypto economy, becomes vulnerable.

Increased dollar debasement may encourage a gradual shift toward non-USD stable assets, such as gold-backed or decentralized, over-collateralized stablecoins like DAI, which use crypto collateral instead of fiat reserves.

At the same time, the appeal of scarce crypto assets like Bitcoin is likely to increase dramatically as investors seek protection against fiat depreciation.

Why This Matters

The weakening of fiat currencies directly affects investors’ real wealth, the stability of stablecoins, and the broader allocation of capital across traditional and crypto markets.

Discover DailyCoin’s top crypto currency news:
Stellar’s (XLM) Bull “Waking From Nap”, Says Peter Brandt
XRP Price Bounces After $19B Wipe-out Rattles Markets

People Also Ask:

What is the debasement trade?

The debasement trade refers to investors shifting capital away from fiat-denominated assets into scarce or hard assets like gold, Bitcoin, and real estate, to protect themselves from currency debasement—the erosion of purchasing power caused by excessive money creation or government borrowing.

Why is the debasement trade relevant now?

Central banks, led by the U.S. Federal Reserve, are hinting at rate cuts while inflation remains above target, and governments are increasing budget deficits. This combination raises concerns about the long-term value of the U.S. dollar and other fiat currencies, triggering investor interest in the debasement trade.

How does the debasement trade affect crypto markets?

Most stablecoins, including USDC and USDT, are pegged to the U.S. dollar. As the dollar weakens, the trust and value of these stablecoins may be impacted. At the same time, scarce crypto assets like Bitcoin may gain demand as protection against fiat depreciation.

DailyCoin's Vibe Check: Which way are you leaning towards after reading this article?
Bullish Bearish Neutral
Market Sentiment
0% Neutral
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
PoolX: Earn new token airdrops
Lock your assets and earn 10%+ APR
Lock now!

You may also like

Opening circulation at 3%, will LAB experience a scenario of opening low and going high?

Short selling should be approached with caution.

ForesightNews 速递2025/10/15 03:19
Vaulta continues to expand its institutional-grade service landscape with the launch of the new financial management platform Omnitrove

Omnitrove is committed to bridging crypto-native assets with real-world financial infrastructure, providing a unified interface, AI-powered tools, and real-time prediction capabilities to empower diverse digital asset management scenarios and applications.

BlockBeats2025/10/15 03:19
Morning News | Citibank plans to launch crypto asset custody services next year; Pyth Network partners with Kalshi

An overview of important market events on October 13.

Chaincatcher2025/10/15 03:19
Who is Kyle Wool, who helped the Trump family earn 500 million dollars?

This article analyzes how investment bank Dominari Holdings Inc. and its president Kyle Wool leverage their close relationship with the Trump family to conduct highly profitable trades in the micro-cap stock sector. It also explores how this model enables Trump's two sons, Eric and Donald Jr., to quickly monetize their reputation and amass substantial wealth, while highlighting the potential conflicts of interest and fraud risks present in the micro-cap market and its IPOs.

Chaincatcher2025/10/15 03:19

Trending news

More
1
Opening circulation at 3%, will LAB experience a scenario of opening low and going high?
2
Vaulta continues to expand its institutional-grade service landscape with the launch of the new financial management platform Omnitrove

Crypto prices

More
Bitcoin
Bitcoin
BTC
$112,283.19
-1.06%
Ethereum
Ethereum
ETH
$4,095.1
-1.45%
Tether USDt
Tether USDt
USDT
$1
-0.05%
BNB
BNB
BNB
$1,212.27
-4.96%
XRP
XRP
XRP
$2.49
-2.71%
Solana
Solana
SOL
$202.14
-1.97%
USDC
USDC
USDC
$0.9999
-0.02%
Dogecoin
Dogecoin
DOGE
$0.2033
-2.06%
TRON
TRON
TRX
$0.3176
-1.03%
Cardano
Cardano
ADA
$0.6935
-2.81%
How to sell PI
Bitget lists PI – Buy or sell PI quickly on Bitget!
Trade now
Become a trader now?A welcome pack worth 6200 USDT for new users!
Sign up now
Trade smarter