Bitcoin surged to a record high last week before experiencing a dramatic setback, raising questions about whether the so-called debasement trade still holds for crypto traders seeking protection against currency erosion.
Bitcoin Plunges After Tariff News
At the start of last week, Bitcoin broke past $126,000, reaching fresh all-time highs amid ongoing investor interest in digital assets. However, on Friday, a major market disruption occurred after President Trump signaled the potential imposition of “massive” new tariffs on China.
The announcement triggered an unprecedented liquidation event, wiping out more than $19 billion in leveraged crypto futures in a single day. Bitcoin’s price dropped sharply below $110,000, though it has since partially recovered to around $113,494, according to CoinGecko. Meanwhile, gold climbed to a new record of $4,099 per ounce on Monday, reflecting continued demand for safe-haven assets.
The Debasement Trade Perspective
Investors have increasingly turned to alternative assets such as gold, Bitcoin, and select stocks as a hedge against government debt concerns and monetary expansion. Even after last week’s flash crash, experts say Bitcoin remains well-positioned within this debasement trade framework.
Greg Magadini, Director of Derivatives at Amberdata, told Decrypt that the debasement trade could last another decade. “Global inflation makes holding U.S. dollars and long-term treasuries riskier,” he said, emphasizing that these conditions favor Bitcoin over time.
Historically, Bitcoin has benefited when central banks pursue expansionary monetary policies. During the Covid-19 pandemic, for example, U.S. interest rates dropped to zero, prompting Bitcoin to reach new peaks. The Federal Reserve has since hiked rates aggressively but is now cutting them again. Research strategist Dilin Wu from Pepperstone noted that unless interest rates remain high, the conditions supporting the debasement trade are likely to persist.
“In my view, only sustained increases in real interest rates or renewed fiscal discipline would alter Bitcoin’s role as a hedge,” Wu explained. She added that a strong dollar or significant institutional withdrawals could reduce Bitcoin’s appeal. “Absent these factors, the upside momentum for Bitcoin remains intact.”
Altcoins Also Impacted
While Bitcoin has recouped some losses, other major cryptocurrencies have suffered heavier declines. Solana and XRP, ranked fifth and sixth by market capitalization, remain over 30% below their recent highs, even as they recover from last week’s plunge.
Zach Pandl, Head of Research at Grayscale, reassured investors that these dips are likely temporary. “Crypto markets often recover from the washout of leveraged positioning,” he said. “If the debasement trade continues, major altcoins are expected to climb toward new highs over time.”
Outlook for Traders and Investors
Despite the recent volatility, Bitcoin’s role as a hedge against currency debasement remains relevant. Analysts suggest that both retail and institutional investors will continue to buy Bitcoin and other digital assets as long as inflationary pressures and expansive monetary policies persist.
Traders are advised to watch key technical levels and broader macroeconomic developments, including interest rate trends and trade policies, which could influence crypto prices in the coming weeks. Meanwhile, gold and other alternative assets continue to provide complementary avenues for protecting wealth against currency erosion.
While short-term swings are inevitable, the combination of macroeconomic uncertainty, ongoing ETF interest, and institutional accumulation supports the notion that Bitcoin’s debasement trade narrative remains robust. Investors and traders alike are likely to monitor these developments closely as the market navigates a period of heightened volatility.
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