"The depreciation trade is back! Gold and Bitcoin ETFs attracted about $7 billion in five days, with two major scarce assets strengthening simultaneously."

As concerns over the U.S. fiscal deficit, government debt, and the outlook for the dollar resurface, investors are flocking to both gold and Bitcoin, rather than choosing between the two assets. Recent fund flow data shows that exchange-traded funds (ETFs) tracking gold and Bitcoin have attracted a record inflow of about $7 billion over the past five trading days, indicating that these two scarce assets are becoming important safe-haven options for global capital once again. According to the data, during the last five trading days, SPDR Gold Shares (GLD.US) under State Street Investment Management attracted nearly $3.4 billion in inflows, while the iShares Bitcoin Trust ETF (IBIT.US) under BlackRock, Inc. saw approximately $1.5 billion in net inflows. Both funds have entered the top ten of U.S. ETFs ranked by inflows during the same period, with GLD's inflow trailing just behind a few large stock ETFs, including the S&P 500 ETF (VOO.US). The simultaneous large inflows into gold and Bitcoin are particularly noteworthy. In recent times, when market risk aversion rises, gold often attracts funds due to its traditional status as a safe-haven asset, while Bitcoin's identity as "digital gold" has been more frequently questioned. However, now both types of assets, representing different forms of "scarcity," are experiencing synchronized strength. A key factor driving this change is the market's renewed concerns about the U.S. government's significant financing needs, the trend of the dollar, and the potential impacts of the government's attempts to suppress long-term Treasury yields. U.S. Treasury Secretary Janet Yellen previously announced that the Treasury would double the scope of long-term Treasury buybacks. Following this news, U.S. Treasury yields and the dollar briefly fell, while both gold and Bitcoin surged. This further reinforced investors demands for scarce assets whose supply cannot be easily increased by the government. Gautam Chhugani, a senior analyst at Bernstein for global digital assets, noted that the nearly 40-year era of declining interest rates seems to have ended, and with sovereign debt levels reaching unprecedented heights, governments are facing increasingly high debt servicing costs. In this environment, investors may benefit from holding scarce assets like Bitcoin, which cannot be easily created or diluted. Recent market movements have also brought "devaluation trades" back into focus. This trading logic posits that when government fiscal pressures mount, and policymakers ease debt burdens through more accommodative financial conditions, investors are more inclined to hold assets that exist outside the monetary system and have constrained supplies. Gold has been the traditional choice due to its established role as a store of value and safe-haven, while Bitcoin's capped supply of 21 million coins is increasingly seen by investors as a tool to hedge against currency depreciation and fiscal risks. Eric Balchunas, senior ETF analyst in industry research, indicated that this is crucial for the long-term investment narrative of Bitcoin, as Bitcoin's core story should inherently be about being an asset that resists currency devaluation. Ray Dalio, founder of Bridgewater Associates, recently suggested that investors reduce their bond allocations, proposing that they allocate up to 10%-15% of their portfolios in gold, while holding a "small amount" of Bitcoin to hedge against potential U.S. debt crisis risks. It is worth noting that the speed of recent inflows is accelerating significantly. The GLD, with a size of approximately $155 billion, has seen cumulative net outflows of about $2.8 billion this year, but in the last five trading days alone, it attracted about $3.4 billion in inflows, indicating a marked change in attitudes towards gold. The IBIT, with about $60 billion in assets, has remained relatively stable this year, accumulating approximately $830 million in inflows during the same period, while attracting about $1.5 billion in the last five trading days. Noelle Acheson, author of "Crypto Is Macro Now," believes that the accelerating trend of inflows is particularly noteworthy. She stated that this momentum in fund flows might suggest that investors who previously underallocated to gold and Bitcoin are rapidly increasing their positions. The significant inflow of funds has also driven both assets to rise in tandem recently. Gold has risen by about 13% this month, with recent prices surpassing $4,600 per ounce; Bitcoin has also seen strong momentum, breaking above the $80,000 mark. This synchronized increase indicates that both gold and Bitcoin are currently benefiting from concerns about the U.S. fiscal situation, government debt, and the purchasing power of the dollar. In the past, investors may have viewed gold and Bitcoin as competing alternative assets, but the latest fund flows demonstrate that some investors are beginning to allocate to both simultaneously, using gold as a traditional safe-haven asset while leveraging Bitcoins fixed supply characteristics to hedge against long-term monetary and fiscal risks. However, not all Wall Street institutions believe that "devaluation trades" will continue to be the primary driver behind the rises in gold and Bitcoin. Fundstrat economic strategist Hardika Singh believes that the momentum of this trade logic may be waning, and that stocks could ultimately become a more reliable hedge than gold or Bitcoin. She pointed out that the U.S. expanding fiscal deficit is indeed a concern, but if the market gradually accepts that there is no clear short-term solution to this problem, investors may ultimately adapt to this fiscal environment. In this context, gold and Bitcoin still have the potential to continue rising, but the reasons for price increases may not solely stem from concerns over currency devaluation.