When betting on the artificial-intelligence trade outpaces gains in the world's biggest digital currency by more than 200%, you know you're witnessing a sea change in the global investment zeitgeist.
And when Bitcoin's long first-half decline, currently at around 30%, is topped by a 50% drawdown in silver, and tested by a 25% decline in gold, those changes are cementing themselves into the market heading into the second half of the year.
It was less than a year ago, of course, when Bitcoin topped $126,000 amid its long two-year rally that powered the digital currency some 350% higher as investors bet on a dollar debasement trade.
"When something is at an all-time high, the narrative and fundamental thesis is often very enticing and hard to dispute," said Jonathan Krinsky at BTIG.
"Like Bitcoin and software last October, precious metals in January ...things can change quickly," he added.
The dollar debasement trade -- and its 'Sell America' shorthand -- had a host of sound theories: tariff-induced inflation pressures, massive government borrowing, and President Donald Trump's relentless attacks on former Federal Reserve Chairman Jerome Powell.
It worked for a while: Bitcoin enjoyed its record run, the dollar fell 5.6% against a basket of its global peers in the year after Trump's election, and gold scaled to the record highs of $5,589 an ounce it reached in late January.
It's not working now.
Bitcoin is trapped in its current drawdown and fell below $60,000 for the first time since 2024 earlier this week, while the dollar index traded at the highest levels in more than 13 months. At last check, Bitcoin was at just under $59,230.
"We were rightly skeptical about this so-called 'Sell America Trade'," said Ed Yardeni, founder and president of Yardeni Research.
"As tariff concerns eased and recession fears abated, the debasement narrative lost momentum," he added. "Its credibility might have ended last Wednesday, when Fed Chair Kevin Warsh made price stability his top priority at his first policy meeting."
Warsh's hawkish tone, and the changes in rate forecasts it triggered, creates a headwind for Bitcoin that will be hard to overcome.
"Through 2024 and 2025, part of the case for Bitcoin as an institutional allocation rested on an easing cycle ahead; a forecast of tightening inverts that premise," said Deutsche Bank research analyst Marion Laboure.
"When the risk-free rate rises, the opportunity cost of holding a non-yielding asset increases, and Bitcoin trades as a liquidity-sensitive risk asset rather than a safe haven," she added.
Spot Bitcoin ETFs have posted six consecutive weeks of outflows measuring around $6 billion, the most in two years, as AI and tech stocks absorbed more capital flows into the end of the quarter.
The picture isn't much better for Bitcoin-adjacent stocks, either, with Strategy shares falling more than 70% over the past six months to trade south of $100 a share for the first time since 2024 earlier this week. Strategy sold Bitcoin for the first time since 2022 last month.
The group's current market value, pegged at $32.3 billion, sits some 36% south of its Bitcoin holdings, which it carries as $51 billion. However, its average cost of $75,651 is about 20% north of Bitcoin's current trading price of $61,100.
Furthermore, Bitcoin's decline of around 43% over the past year matches poorly to the staggering 158% advance seen in the PHLX semiconductor index, home to the market's hottest chip stocks, including Micron Technology. The chip maker blasted Wall Street earnings forecasts on Wednesday and expects to see massive demand for the next two years.
The tech-focused Nasdaq Composite is still down around 4% over the past month but is on pace to finish the quarter with an impressive gain of around 20%. The S&P 500, meanwhile, is likely to end the first half of the year with an 8% advance.
That likely leaves Bitcoin at the mercy of the "Tinkerbell Effect," which theorizes that its value is more tied to the belief of its holders than the mechanics of the market.
"Bitcoin is not disappearing; it is maturing into an institutional asset whose price is set by fund flows, Fed expectations, competing risk themes, and legislative outcomes," said Deutsche Bank's Laboure. "Volatility, as ever, is not a bug but a feature."
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 25, 2026 11:29 ET (15:29 GMT)
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