Lale Akoner, global markets analyst at eToro: Dollar ‘debasement’ or just another bearish cycle?
The debate over so-called «dollar debasement» has regained momentum as US deficits grow and investors begin to worry about the long-term value of the greenback. The so-called «debasement trade» refers to positioning portfolios for a world in which paper money gradually loses its purchasing power. In practice, that means adding assets that can maintain or increase their real value when currencies weaken, typically gold, commodities and, increasingly, bitcoin.
It is still debated whether the dollar is truly being «debased» or is simply going through another bearish cycle, but there is no denying that investors are taking precautions. In eToro’s latest Retail Investor Beat, around one in three global investors (34%) said they plan to adjust their portfolios in the face of a weaker dollar, and roughly half have already done so or intend to. The reality is that the combination of high US debt, persistent fiscal deficits and shifts in global reserves is encouraging investors to seek real-asset hedges.
The ‘debasement trade’ does not mean abandoning the dollar, but rather diversifying away from it. This may involve holding multiple currencies, increasing exposure to tangible assets such as gold, which acts as a hedge independent of fiat currency, and allocating a small amount to Bitcoin as a higher-risk, liquidity-sensitive complement. For those seeking income, quality dividend stocks and infrastructure assets can also help preserve purchasing power.
The key is not to overreact. Dollar cycles are long, and news headlines tend to exaggerate the risk. A balanced approach that maintains some exposure to tangible assets, limits over-reliance on the US currency and rebalances periodically allows investors to stay protected without turning defensive too early. In short, the «debasement trade» is not about being pessimistic, but about sensibly preparing for a world in which diversification matters more than ever.
This content is for informational and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. CFDs are leveraged products and carry a high risk to your capital.
Cryptoasset investing is unregulated in some EU countries and the UK. There is no consumer protection. Your capital is at risk.
