The 'debasement trade' returns after Bessent bond maneuver. Crypto and gold are back in style

The debasement trade is gaining new traction on Wall Street as concern over the size and cost of the budget deficit mounts.

The conventional wisdom behind the trade is that perceived hard assets, like cryptocurrencies and precious metals, gain as investors try to hedge against a weaker U.S. dollar and Treasury debt in the face of ballooning government spending. Those fears reached a fever pitch last week before, and after, the Treasury Department's unusual step of increasing debt buybacks under Secretary Scott Bessent.

"The size of the Treasury purchases announced so far by Bessent are trivial in comparison to the size of the overall market, but the [signaling] effect was very powerful," said Stephen Coltman, head of macro at 21Shares, a crypto-focused creator of exchange-traded funds.

Gold touched three-month highs Monday, building on last week's advance of more than 5%. The yellow metal has climbed for five straight weeks and in August is on track for its biggest monthly rise since 1999.

Gold and bitcoin over the past month