MW Is the 'debasement trade' dead? Outflows from gold and bitcoin ETFs suggest investors are moving on.
By Steve Goldstein
Factiva found 502 articles on the topic in October. In April and May just 27 and 34 were identified.
Investors are shying away from both bitcoin and gold - perhaps that's evidence that the "debasement trade" is dead.
Is the "debasement trade" dead?
Roughly speaking, the debasement trade is the idea that investors are moving out of currencies and into assets like gold, silver and bitcoin due to governments continually increasing their spending and making little effort to curtail debt. It has fallen out of favor as a discussion point.
The media-monitoring service Factiva, which like MarketWatch is owned by Dow Jones, found 502 articles on the topic last October. In May only 34 were identified, after just 27 in April.
Now one of the analysts who popularized the idea is saying investors have given up on the theme, as well.
Nikolaos Panigirtzoglou, the JPMorgan strategist who identified the debasement trade in financial markets in October, says investors seemed to have moved on from the strategy.
He points out that bitcoin exchange-traded funds have seen two weeks of outflows, and so have gold ETFs. "These outflows appear to be more consistent with a broad retreat by investors from the debasement trade, potentially in anticipation of an Iran-U.S. deal, rather than with a rotation from bitcoin to gold," he says.
See: Oil prices rise after fresh round of strikes by both U.S. and Iran, pushing peace deal into doubt
A similar process is underway with respect to the bitcoin futures (BTC00) that are more popular with institutional investors. Panigirtzoglou says bitcoin futures were the vehicle for institutional investors to play the debasement trade since the ongoing Mideast war broke out, given that gold (GC00) peaked in price at the end of January. But now they have also reduced their exposure.
Positioning buildup by momentum traders also lost steam in both bitcoin and gold over the past week or two, he adds.
It is worth noting that gold, while off its highs, has still quadrupled in value over the last decade. Bitcoin (BTCUSD) a decade ago was trading around $500; on Thursday, the No. 1 cryptocurrency by value was trading above $73,000.
The U.S. dollar DXY, meanwhile, hasn't exactly surged, but it has gained about 1% on a trade-weighted basis since the Iran war, according to Federal Reserve data.
"It's worth reiterating how the dollar now enjoys stronger macro support than it did in early May, when markets latched onto an overly optimistic de-escalation narrative," said Francesco Pesole, a currency strategist at ING. "Hot U.S. inflation data from a couple of weeks ago continues to feed through rates and FX, keeping Fed expectations stickier on the hawkish side whenever oil sells off."
-Steve Goldstein
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May 28, 2026 09:44 ET (13:44 GMT)
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