Bitcoin slides as Fed hike bets unwind the debasement trade
Gold and silver are tumbling from their January 2025 highs as markets reprice the Fed path. Gold is down about 28% from its ~$5,600/oz peak and is trading below $4,000. Silver has fallen more than 50% from its near-$120 record, slipping under $59.
The driver is a shift toward tighter monetary policy under new Fed Chair Kevin Warsh. Markets are pricing two 25 bps rate hikes by March 2027, lifting the fed funds rate to 4.00%–4.25% amid renewed inflation fears.
The move reverses the 2025 “debasement trade” narrative, which argued persistent fiscal deficits and rising government debt would erode fiat purchasing power. Bitcoin, however, lagged the earlier metal-led strength and has stayed pressured in the broader correction.
Bitcoin is below ~$62,000, roughly a 50% pullback from its October all-time high, and it is trading under its long-term 200-week moving average near $62,800. Despite the weakness, bitcoin has outperformed precious metals since February on improved BTC-to-metals ratios, rising ~30% vs gold and 55% vs silver.
Still, all three assets are lagging US equities in 2026, where momentum is concentrated in semiconductors and memory-related stocks.
Bearish
The article’s core signal is a macro pivot toward tighter policy—market pricing for two further 25 bps rate hikes by March 2027 is pressuring non-yielding assets and risk appetite. That helps explain why gold and silver are breaking key psychological levels, and why bitcoin is also slipping below its long-term trend (the ~200-week moving average near $62,800).
In prior cycles, when “debasement” narratives (fiat erosion via deficits) are overtaken by renewed inflation fears and higher-for-longer rate expectations, traders often rotate away from defensive/hedge trades into cash-yielding assets or rate-sensitive equity leadership. The same dynamic is visible here: despite bitcoin outperforming metals on relative ratios since February, the absolute trend is still down.
Short-term, this backdrop typically supports bearish price action, with rallies prone to fade until rates expectations stabilize. Long-term, if inflation fears cool or the Fed path shifts back toward easing, bitcoin could regain its role as part of the hedge complex—especially if its relative strength vs metals persists. But for now, the dominant driver remains tightening expectations, keeping upside capped and volatility elevated.