Bitcoin and Gold Surge as Treasury Move Sparks 'Debasement Trade'

Bitcoin and gold staged a dramatic comeback this week, propelled by a surprise US Treasury announcement and fresh political momentum for cryptocurrencies in Washington.

After a sluggish first half of the year, both assets surged. Bitcoin, which had fallen from a January peak of around $95,000 to below $60,000 by late June, climbed past $77,000 on Friday. Gold, similarly, rebounded from a June slump near $4,000 to $4,661 on the same day.

The catalyst came Wednesday when the Treasury Department revealed plans to at least double its buybacks of long-term government debt. The move, aimed at calming a turbulent bond market, had an immediate ripple effect: the dollar sold off, and investors rotated into alternative assets.

This shift is being described as the 'debasement trade,' where capital flows into assets like gold and, increasingly, bitcoin as a hedge against currency devaluation. Gold rose over 2% on Wednesday alone, while bitcoin jumped more than 20% for the week.

The Treasury's intervention, led by Secretary Scott Bessent, is intended to lower long-term borrowing costs. However, it raises concerns about inflationary pressure and potentially ties the hands of the Federal Reserve, which typically fights inflation with higher interest rates.

Adding to the anxiety, the US national debt crossed a record $40 trillion on the same day, just five months after hitting $39 trillion. This, combined with geopolitical tensions in Iran and soaring energy prices, has heightened fears about the true risk of holding US debt.

In Washington, President Donald Trump, who earned nearly $1.2 billion from his crypto ventures last year, hosted a White House crypto conference on Wednesday. He urged Congress to pass the Clarity Act, arguing it would keep the US ahead of China. Commodity Futures Trading Commission Chair Mike Selig echoed this, vowing to use all available tools to advance the agenda.

Bitcoin's rally was amplified by market mechanics. The price had been range-bound between $62,000 and $67,000 for weeks, leading many investors to bet against it. When the Treasury news broke and yields fell, bitcoin blasted through that ceiling. This forced those with bearish positions to buy back the asset to cover their bets, creating a feedback loop that pushed prices even higher. By Friday, over $4 billion in bearish crypto positions had been liquidated, according to CoinGlass.