Bitcoin advanced toward a new record high on Monday as investors sought refuge from mounting fiscal risks across major economies, driving a renewed wave of demand for cryptocurrencies, gold and silver.
The rally underscores the growing momentum behind what analysts call the “debasement trade” — a broad shift away from traditional currencies amid global debt expansion and political uncertainty.
The world’s largest cryptocurrency traded close to its all-time high, having appreciated about 30 percent against the US dollar this year, while gold and silver also strengthened to multi-year peaks.
The move comes as the US government shutdown continues, Japan prepares for a pro-stimulus leadership transition, and political instability in Europe adds to concerns about long-term fiscal sustainability.
Fiscal Strains Fuel the “Debasement Trade”
At the core of the shift lies a growing pile of public debt that the United States, Japan, and several European nations are struggling to contain.
The resulting erosion of fiscal discipline and the rising cost of servicing that debt have undermined investor confidence in major currencies, prompting diversification into alternative assets.
“Global markets are witnessing a familiar pattern — investors moving away from fiat currencies into hard assets and digital alternatives,” said Chris Weston, Head of Research at Pepperstone Group. “There’s nothing that breeds sentiment like a market that’s going up. You’ve got to be in it.”
The Japanese yen weakened 1.6 percent against the dollar on Monday after pro-stimulus lawmaker Sanae Takaichi was positioned to become Japan’s next prime minister.
The move fueled expectations of additional fiscal spending and reduced the likelihood of near-term tightening by the Bank of Japan. Gold and Bitcoin both reached record highs against the yen, reflecting deepening concerns about currency debasement in Asia’s second-largest economy.
US Dollar Under Pressure
The US dollar remains under pressure as the Washington shutdown drags on and investors grow increasingly uneasy about the government’s fiscal path.
The Bloomberg Dollar Spot Index rebounded slightly by 0.3 percent on Monday after last week’s slide, but remains down roughly 8 percent for the year.
Analysts at JPMorgan Chase & Co. said the current trend echoes market patterns seen after the global financial crisis, when monetary stimulus and rising deficits weakened faith in the greenback.
“The familiar pattern of dollar debasement against alternative reserve assets amid Washington dysfunction is on display again,” wrote Meera Chandan and her team in a note to clients.
The dollar’s weakness has further strengthened Bitcoin’s investment appeal, especially among institutions seeking uncorrelated returns and protection against long-term inflation.
Crypto Gains Paralleling Precious Metals
Bitcoin’s rally has closely mirrored that of gold, which climbed above $3,900 an ounce, and silver, which approached record territory. Analysts say this parallel movement signals that investors are not merely chasing speculative momentum, but are repositioning portfolios in response to structural macroeconomic risks.
Both assets are viewed as non-yielding stores of value, benefiting from expectations that central banks will maintain accommodative policies to sustain growth amid fiscal fragility.
Weston described the current environment as “a big momentum trade built on genuine macro fundamentals.” He noted that as the “buy-the-dip” psychology becomes entrenched in alternative asset markets, the correlation between Bitcoin and gold continues to strengthen, making both assets essential parts of defensive investment strategies.
European Political Uncertainty Adds Pressure
In Europe, the euro slipped 0.1 percent against the dollar as political tensions resurfaced in France, compounding the region’s fragile fiscal outlook. The European Central Bank faces limited room to maneuver, given sluggish growth and elevated debt levels across member states.
Market analysts warn that any renewed fiscal stimulus or prolonged political instability could accelerate the capital flight toward digital and precious assets.
Outlook
With Bitcoin hovering near record highs and fiscal deficits widening globally, market sentiment remains firmly risk-averse. Analysts expect continued inflows into cryptocurrencies and metals as traditional currencies lose purchasing power amid loose monetary and fiscal policy environments.
“The market is expressing a clear message,” Weston said. “Investors no longer trust that governments can manage debt sustainably. Bitcoin and gold are becoming modern hedges against fiscal excess.”
As governments from Washington to Tokyo grapple with rising debt burdens and slowing growth, the “debasement trade” appears poised to remain one of the defining investment themes of the decade — anchoring Bitcoin’s evolution from a speculative asset to a recognized macro hedge in the global financial system.