Grayscale's crypto research team sees the 'debasement trade' as a growing tailwind for bitcoin, citing runaway U.S. government debt and eroding trust in fiat currencies. Research head Zach Pandl said in a new report that unchecked debt growth weakens the credibility of fiat money, driving investors into alternative stores of value like physical gold and certain digital assets — with bitcoin the main beneficiary. The report notes that U.S. public debt has topped $40 trillion, and while the Treasury has used bond buybacks to ease borrowing costs, the core deficit persists. Grayscale expects such conditions to push investors toward debasement trades involving bitcoin, ether and Zcash. The buyback effort itself, the report argues, shows that the Treasury is only addressing the symptom of higher bond yields, not the structural deficit underneath. Meanwhile, bitcoin gained momentum last week as the dollar posted its worst week of August and fell to a three-month low. Bitcoin was trading around $77,493 as of Friday afternoon New York time, after hitting an intraweek high of $81,281. It was roughly flat over 24 hours but up more than 20% over the past month.
Grayscale's crypto research team said in a report that the so-called "debasement trade" is turning out to be a tailwind for bitcoin.
Zach Pandl, the asset manager's head of research, argued that unchecked growth in government debt is eroding confidence in fiat currencies. That, he said, is pushing investors toward alternative stores of value — physical gold and certain cryptocurrencies — with bitcoin standing to gain the most.
The report noted that U.S. public debt has surpassed $40 trillion. While the Treasury has been buying back bonds to ease rising borrowing costs, the core deficit remains. Grayscale believes this could lead investors into debasement trades involving bitcoin, ether and Zcash.
The buyback program itself is telling, the report said. Heavy government debt accumulation is raising borrowing costs, and the Treasury is only treating the symptom — higher bond yields — rather than fixing the root cause of structural deficits.
Bitcoin started surging last week, while the dollar suffered its worst week of August and slid to a three-month low. As of Friday afternoon New York time, bitcoin was trading around $77,493, after touching a weekly high of $81,281. It was roughly flat over the past 24 hours, but up more than 20% over the past 30 days.
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