Is the ‘debasement trade’ about to flood BTC ETFs?

Gold pushed through $4,000 per ounce for the first time this week, validating a macro narrative that is spilling into Bitcoin demand and positioning spot ETFs for record fourth-quarter flows.

The “debasement trade” involves investors shifting their holdings from fiat-denominated cash and bonds into assets that retain purchasing power when government debt is high or currency credibility is in question.

Investors purchase scarce assets, such as gold, Bitcoin, and real commodities, to hedge against currency erosion when monetary policy loosens or fiscal slippage accelerates.

The logic applied is that if the currency’s real value is eroding, the answer is owning things that cannot be printed.

Additionally, real yields have wobbled as fiscal risks mount, and the US money supply has increased 44% since 2020, creating conditions that favor scarce assets.

Getting into gold’s draft

Gold’s surge crystallized the hedge narrative. Analysts attributed the rally to growing concerns about public debt, a prolonged US government shutdown, and persistent demand for safe-haven assets, with central bank buying and ETF inflows reinforcing the move.

Bitcoin has been mentioned alongside gold as an alternative to hedge against debasement, and flows confirm this connection.

Last week, spot Bitcoin ETFs recorded $3.5 billion in net inflows, with a total of roughly $5.9 billion flowing into crypto funds overall. This is a record for both Bitcoin and crypto products in terms of weekly flows.

The timing reflects shared drivers. Gold’s break above $4,000 validates the macro hedge bid and widens the audience for hard-asset exposure.

Meanwhile, ETFs make Bitcoin the marginal recipient because they remove custody and operational friction for US institutions.

The co-movement in narratives and fund flows has been evident, even if the assets do not track each other on an hour-to-hour basis.

Part of a bullish case

Matthew Hougan, chief investment officer at Bitwise, published a note on Oct. 7 outlining three catalysts for a strong fourth quarter in Bitcoin ETF flows.

The first is platform approvals. Hougan mentioned Morgan Stanley’s report, stating that financial advisors and clients at the firm may now allocate to crypto as part of multi-asset portfolios, suggesting allocations of up to 4% for risk-tolerant investors.

Morgan Stanley’s 16,000 advisors manage $2 trillion. Additionally, Wells Fargo, with roughly $2 trillion in assets under management, also recently allowed advisors to allocate on behalf of clients.

Hougan noted that new guidance takes time to be processed across tens of thousands of financial professionals, but conversations with advisors indicate a serious pent-up demand. He expects meaningful flows in the fourth quarter as those approvals translate into allocations.

The second catalyst is the debasement trade itself. Gold and Bitcoin are the best-performing major assets in 2025, with JPMorgan publishing a report on the debasement trade on Oct. 1.

Hougan argued that when advisors conduct year-end reviews with clients, they want portfolios to reflect the year’s most successful investments. He added that last year, it meant Nvidia, and this year, it means gold and Bitcoin. He expects strong flows through year-end as advisors position for annual reporting.

The third catalyst is price momentum. Bitcoin broke through $100,000 and reached an all-time high above $125,000, gaining 9% in the first week of October alone.

Higher prices often lead to increased demand for Bitcoin ETFs, as media coverage and investor attention rise. Hougan noted that in every quarter where Bitcoin posted double-digit positive returns, ETFs recorded double-digit billions in inflows.

Bitcoin ETFs have attracted $25.9 billion in net inflows through the first nine months of 2025, putting them on pace for approximately $30 billion by year-end.

That total would fall short of the record $36 billion in 2024. Hougan projects that platform approvals, debasement-trade positioning, and price momentum will push fourth-quarter flows above $10 billion, setting a new annual record.

The debasement narrative ties those factors together. Gold at $4,000 validates the currency-hedge thesis, platform approvals expand distribution, and Bitcoin’s price surge captures attention.

Bitcoin feels the same macro pressure that drives gold, with spot ETFs providing a frictionless channel for allocators to express that hedge through digital rails.

As soon as more investors acknowledge this, a new wave of capital might flood Bitcoin.

Mentioned in this article