Bitcoin has once again captured the attention of capital markets after the U.S. Treasury Department announced an increase in the limits for debt buyback operations from September 9 to November 4, sparking a market rally and prompting analysts to once again discuss "devaluation trading."
"Devaluation trading" is a market strategy where investors reduce their positions in fiat currencies, such as the dollar, and bonds, instead focusing on protecting their capital by accumulating hard assets considered stores of value, such as gold, bitcoin, and real estate.
Glassnode noted that BTC acted as a leading indicator for this strategy, rising more than 20% following the announcement, while stocks remained largely unchanged. Prior to this, Bitcoin proponents appear to have been preparing for this move since January, with Glassnode emphasizing that the situation resembled what happened in 2022.
"In this cycle, the share of supply bought by this group is even larger than in the last cycle," stated the research company.
Robin Brooks, former chief currency strategist at Goldman Sachs and senior fellow at the Brookings Institution, explained that this new phase of devaluation trading, unlike the previous one, will also be accompanied by a sharp decline in the dollar's value.
"This is just starting anew and will be even more powerful this time due to the downward pressure that news of the Treasury bond buyback puts on the dollar. Thus, this round of devaluation trading is largely about dollar weakness," he assessed.
Nevertheless, Brooks is uncertain about Bitcoin's role in this new dynamic: "I would stay away from Bitcoin. Markets do not perceive it in the same way as gold and silver. It is definitely not a safe haven," he stated.
Nonetheless, since the Treasury announcement, Bitcoin's gains have outpaced all commodities and precious metals. This suggests investors view it as "digital gold," allowing it to break its correlation with risk assets such as technology stocks.
