The Debasement Portfolio Explained
Why Gold, Why Now?
US M2 money supply growth rate as a sign of persistent debasement trend in the US. Rapid money supply growth has been consistent for years, both in USD and other fiat currencies. Gold has done its job in holding value and overcoming debasement over longer periods of time. Yet there are long periods of time where gold consolidates sideways. After great performance in the first decade of the 2000’s, it was in little demand for the second.
1971: Nixon Shock – End of Bretton Woods.
1980: Stagflation Peak.
1999: Modern Low.
2008: Global Financial Crisis.
2011: Eurozone Debt Crisis.
2020: COVID-19 Pandemic.
2022: Inflation Surge.
2025: Geopolitical & Inflation Rally.
I started pounding the table on the role of gold in a portfolio after the global response to the COVID-19 crisis. Not only a monetary response, but fiscal response – free money given to individuals and businesses. Directly pumping money into the economy – a new experiment to save the economy. Plenty of fraud, plenty of government inefficiency in distribution, and certainly a step change in the debt load of the US Government relative to GDP. I was early in that view relative to the market response, it bounced off that COVID-19 bottom but eventually put in a lower bottom in 2022. Timing is rarely perfect. Identifying the core view early and watching the catalysts develop can reduce timing risk.
In the past year, it has become the recipient of an increasingly popular buzzword – the debasement trade. While that euphoria finally resulted in a price correction in late October 2025, I retain conviction in this trade. Establishing a new position will require patience and dollar-cost-averaging. Unlike brief rallies of the past, the spot demand is the driver of the price activity. This one has legs.
The global order is evolving -- China and India are moving more toward gold as a more substantial backing to their currencies. The USD is not going anywhere, it will remain the dominant reserve fiat currency, but fiat currencies in general are increasingly problematic. A shift in the global order is underway, and gold will be a major beneficiary in USD terms.
Gold miners have been capital starved since the peak of the last gold bull cycle in September 2011, with equity financing markets only recently thawing to new exploration and development. Expected returns implied on project financing are extremely attractive as gold has received a renewed bid from the market. Miners bear a higher risk than holding gold itself, but also a higher potential return. Miners are a way of owning gold in the ground, without having to pay to safely store it. A quality mining company replaces more gold in the ground than it mines. Current cash flow yields on these companies are very attractive and make them an attractive cyclical investment with a very strong secular tailwind.
Why Bitcoin and Why Now?
If you have not read the gold primer, please do. The Bitcoin case has many parallels but has different drivers and timing than gold. There are benefits to diversifying between these debasement investments. My personal interest in digital assets developed around the same time I started pounding the table on gold, after the market corrections of the COVID-19 crisis. Bitcoin, the largest and most established digital asset, is also the most proven store of value. In a world of decreasing trust in financial counterparties, it provides a safer means to transfer value with much less friction than the existing global financial system.
The Bitcoin network is secured via an energy intensive “mining” process that verifies the legitimacy of transactions earns Bitcoin when successful. It is also an energy and infrastructure growth play that enables more efficient usage of lower cost or stranded power, as well as a catalyst for bringing new power generation capacity online. We choose to invest in Bitcoin via ETF exposure, not by holding tokens directly on-chain. This is most common for institutional investors as the assets can be held safely in custody. The US is increasingly becoming a friendly regulatory jurisdiction for Bitcoin and other higher quality digital assets.
Blockchain is the underlying technology behind Bitcoin and other digital assets. The real innovation comes from having distributed ledger such that all transaction history is transparent and that is the basis for how security can be maintained without the need to trust the counterparty in a transaction. We consider most other digital assets to fall as technology opportunities, not debasement hedges. Bitcoin is unique in that it is not as subject to a technology leapfrog as other cutting edge blockchains. It is more suited to building a position and holding for a long time.
Learn more about our thoughts regarding recent volatility: Bitcoin Revisited – after weak performance in Q4 2025
Related Blog Posts
Debasement Hedges Revisited | Mid-Q1 2026
Bitcoin Revisited – after weak performance in Q4 2025
Disclosures
All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Advisory services are offered through GenSphere Private Wealth, LLC, a Registered Investment Advisor in the State of Washington. Being registered as a registered investment adviser does not imply a certain level of skill or training. All investing involves risk including loss of principal. Past performance does not guarantee future results.