SKN | Gold and Silver Lead the Debasement Trade as Bitcoin Loses Momentum

Gold and silver have reasserted themselves as primary beneficiaries of the global debasement trade, outperforming most risk assets as investors hedge against fiscal expansion and currency dilution. Bitcoin, long positioned as “digital gold,” has lagged this move, highlighting a shifting preference among institutions toward traditional hard assets amid tightening financial conditions.

Market Reaction Across Hard Assets and Crypto

Spot gold has climbed above $2,450 per ounce, up roughly 18% year-to-date, while silver has surged past $32 per ounce, delivering gains of more than 25% over the same period. In contrast, bitcoin has struggled to keep pace, trading near $82,000 and sitting flat to slightly negative over the past month after failing to hold recent highs.

Flows data underscores the divergence. Gold-backed ETFs have attracted more than $20 billion in net inflows this year, reversing multi-year outflows, while spot bitcoin ETFs have seen more volatile flows, including several weeks of net redemptions. The contrast suggests that capital seeking inflation protection is favoring assets with lower volatility and longer institutional track records.

Macro Drivers and the Debasement Narrative

The renewed strength in precious metals is closely tied to macro fundamentals. Expanding fiscal deficits across developed markets, persistent geopolitical risk, and expectations that real interest rates may trend lower over time have revived concerns about currency debasement. Central banks themselves have been consistent buyers, with official gold purchases exceeding 1,000 metric tons annually for the past two years.

Bitcoin’s underperformance in this phase reflects its dual identity. While often framed as a hedge against fiat dilution, it continues to trade with risk assets during periods of tighter liquidity. Rising Treasury yields and a firmer U.S. dollar have weighed on speculative positioning, blunting bitcoin’s appeal relative to metals that benefit directly from safe-haven demand.

Investor Psychology and Portfolio Positioning

From a behavioral standpoint, institutions appear to be separating long-term debasement hedges from short-term volatility exposure. Gold and silver offer lower drawdowns and established liquidity in stressed environments, characteristics that appeal to pension funds and sovereign allocators. Bitcoin, by contrast, remains more sensitive to leverage dynamics and momentum-driven flows.

That does not imply abandonment. On-chain data shows long-term bitcoin holders maintaining positions, with minimal distribution from wallets holding coins for more than one year. Instead, the shift suggests tactical rebalancing, where investors favor metals for near-term macro hedging while keeping bitcoin as a longer-duration asymmetric asset.

Looking ahead, the relative performance gap will hinge on liquidity conditions and policy signals. A turn toward easier monetary policy or renewed dollar weakness could restore bitcoin’s appeal within the debasement trade. Until then, gold and silver are likely to remain the preferred instruments for institutions seeking immediate protection against fiscal and currency risk, while crypto investors reassess how bitcoin fits within diversified macro portfolios.