The debasement trade is back — and it is set to benefit bitcoin, according to asset manager Grayscale, one of the largest crypto asset managers, whose flagship Grayscale Bitcoin Trust converted into a spot bitcoin exchange-traded fund in January 2024. In a note published this week, the firm's crypto research team wrote that the U.S. government debasing its currency would lead to cash hitting digital assets.

"Unchecked government debt growth undermines the credibility of fiat currencies and drives investors to seek out alternative stores of value like physical gold and certain cryptocurrencies," read the note by Zach Pandl, the firm's head of research, who added that bitcoin would be the primary beneficiary.

Grayscale summarized its position in a post on X on August 28, 2026:

US public debt has reached over $40 trillion. The Treasury is buying back bonds to ease rising borrowing costs, but core deficit remains. Grayscale Research believes this may drive investors towards the debasement trade: Bitcoin $BTC , Ethereum $ETH , and Zcash $ZEC . Read more… pic.twitter.com/tN3xgaNZ1l

— Grayscale (@Grayscale) August 28, 2026 (x.com/Grayscale/status/2093358354169299379)

The so-called debasement trade is when investors buy an asset as a way to hedge against a currency losing value. The same theme has run through gold markets in recent years: central banks have bought more than 1,000 tonnes of the metal annually since 2022, according to World Gold Council data, while the price has set successive record highs. The trade was hot last year and helped bitcoin's run, but the digital asset's rally lost steam after October as traders turned their attention to stocks related to artificial intelligence.

Since last week, however, bitcoin has benefited from news that the U.S. Treasury would at least double the size of its liquidity-support buyback operations. The Treasury began conducting regular buybacks of older securities in 2024, its first such program in more than two decades, to keep the world's largest bond market trading smoothly. The announcement hurt the dollar, but non-yielding assets have gained as a result.

"That buybacks are needed at all is the problem: heavy growth in government debt is driving up the cost of borrowing," the note continued. "The Treasury is treating the symptoms (rising bond yields) because they cannot cure the disease (structural deficits)."

The note added that on the same day last week as the buyback announcement, the Treasury also disclosed that U.S. public debt exceeded $40 trillion for the first time — less than five years after the total first crossed $30 trillion in early 2022.

As debt and interest payments grow, the government needs to either raise taxes, cut spending, or issue more debt. Net interest costs have climbed to rival annual defense spending, making debt service one of the largest single items in the federal budget. Bitcoiners see the more politically likely path as expanding the dollar supply — which is ultimately bad for the dollar, and good for scarce assets like bitcoin, whose supply is hard-capped at 21 million coins.

After bitcoin started surging last week, the dollar had its worst week of August and was trading at a three-month low.

Bitcoin was trading for $77,493 on Friday afternoon in New York after hitting a high this week of $81,281. Over a 24-hour period, the coin now sits unmoved, but over a 30-day period, it has jumped by more than 20%. The Treasury's quarterly refunding announcements are the next scheduled updates on how the government plans to manage its financing needs.

This article is based on reporting by Mathew Di Salvo and was first published by Bitcoin Magazine on August 28, 2026.