Bitcoin ‘still qualifies’ for debasement trade as gold towers to fresh record, analysts say

Core Viewpoint - Bitcoin is considered part of the debasement trade despite a significant price drop, as analysts attribute the recent sell-off to technical factors rather than a fundamental failure of Bitcoin's value proposition [1][2]. Market Dynamics - Last week's crash resulted in a loss of approximately $19 billion in leveraged positions across the crypto market, driven by investors fleeing risk assets amid geopolitical tensions, particularly US tariff threats [1][2]. - Gold has surged past $4,200 per ounce, reflecting a more than 50% increase year-to-date, raising questions about Bitcoin's role as a hedge against macroeconomic uncertainty [3][5]. Debasement Trade Concept - The debasement trade, as defined by JPMorgan analysts, involves betting against governments' financial management capabilities, leading investors to withdraw from sovereign debt and fiat currencies due to fears of value erosion from excessive money printing [4]. - Recent political developments, including President Trump's challenges to Federal Reserve independence and ongoing government shutdowns, have intensified concerns about the reliability of Treasuries as a risk-free asset [5]. Perception Issues - Bitcoin's recent price decline may negatively impact its reputation as an inflation hedge, as it has been trading more closely with tech stocks rather than gold, which could reinforce skepticism about its value proposition [6]. - Analysts believe this perception issue is likely to be temporary as the market matures and Bitcoin trading shifts to more regulated venues, reducing the impact of crypto-native liquidation events [7]. Future Outlook - Expectations are that Bitcoin will eventually align more closely with gold's performance in the coming months, as market dynamics evolve [8].