Traders are hiding in debasement as gold and bitcoin roar back to life

But real ones know the action never stops it just moves to a different part of the market. And those paying attention have been able to get a headstart on a popular trade that's coming back in force.

I'm referring to the so-called debasement trade, which, at its core, is a bet on runaway budget deficits and persistently high inflation. It involves owning scarce assets (gold, bitcoin) and selling the currency that policymakers are weakening (the US dollar).

The market has had a renewed reason to make that bet, after Treasury Secretary Scott Bessent announced a surprise bond-buyback plan intended to drive long-term yields lower.

In a narrow sense, Bessent's effort worked. Yields fell from their highs, and remain slightly lower.

But the more consequential message for investors was that the plan didn't actually address the forces pushing yields higher: a nearly $40 trillion national debt, persistent deficits, and the looming specter of inflation. The market increasingly sees Bessent's bond-buyback plan as a Band-Aid rather than a long-term fix a view that's helped weaken the dollar and revive the debasement trade.

The trade, of course, takes two (actually three) to tango. Here's what's driving the assets on the winning side: