Inflation creates a false sense of prosperity in the stock market: The U.S. stock market priced in gold has stagnated since the dot-com bubble.

Behind the seemingly prosperous stock market, the real asset value is eroding. As government deficits and debts soar, institutions are turning to “debasement trade (debasement trade)” with gold and Bitcoin as a safe haven, reflecting a consensus on the long-term decline of the purchasing power of the US dollar. Looking back, this prosperity may just be an illusion driven by inflation.

“Currency Depreciation Trading” Narrative: The New Belief of Financial Institutions

Well-known Bitcoin OG and Silicon Valley investor Anthony Pompliano pointed out in Thursday's podcast that the traditional financial sector quickly realized the rapid decline of the dollar and swiftly turned to devaluation trading, with Bitcoin and gold being the biggest beneficiaries:

Now this fact feels no longer debatable; people have come to understand that the US dollar and bonds will face many troubles in the future, so Bitcoin and gold will certainly benefit.

ProCap BTC investment director Jeff Park also responded in the podcast, noting that private wealth management and financial advisors have begun to incorporate Bitcoin into their investment portfolios, viewing it as an anti-inflation asset, symbolizing that crypto assets have officially been included in the investment targets of depreciating trades.

(Extended reading: Depreciation of trades drives gold and Bitcoin higher, JPMorgan: BTC year-end target price 165K)

Matt Hougan: Currency devaluation is the “dark matter” of the financial system.

Bitwise's Chief Investment Officer Matt Hougan described this phenomenon as “the dark matter of finance (dark matter)”, intangible yet omnipresent:

Once you see this power, many seemingly unexplainable phenomena will quickly become clear.

He cited examples including the persistently high price-to-earnings ratio, the surge in housing prices, the struggles of the middle class, and the disconnection between GDP growth and household wealth. He emphasized that inflation is not just about rising prices, but also about the leverage added to the entire financial system, accelerating the loss of purchasing power.

(Extended Reading: Arthur Hayes Discusses the Uselessness of the Bitcoin Four-Year Cycle: The US and China Accelerate Printing Money Crown BTC as the King of Currency)

The US dollar index has hit a three-year low, and depreciation is now a reality.

At the same time, the US dollar index (DXY) has dropped from a high of 110 at the beginning of this year to a low of 96.3, marking a new low in three years and highlighting the substantial depreciation of the dollar.

Both VanEck and Deutsche Bank emphasize that as deficits accumulate and debt expands, suppressing real yields, investors are turning to value measures that will not be diluted. At this point, gold and Bitcoin have become the most anti-inflationary asset units.

(Extended Reading: Gold Approaches $4,000! VanEck References Gold Price: Bitcoin's Next Halving Could See $640,000)

Truth revealed: If priced in gold, the US stock market has been continuously declining for 20 years.

Economist Mohamed A. El-Erian reminds us that if we measure the returns of the U.S. stock market in gold rather than in dollars, then the U.S. stock market has actually been declining since the dot-com bubble in 1999, and the performance of other global markets is even worse.

In other words, the apparent rise in the stock market is actually just an illusion following the devaluation of fiat currency. Investors measure those assets that have nominally reached new highs with a currency that is “becoming less and less valuable.”

When prosperity is based on printing money, when will the bubble arrive?

As political analyst Rnaud Bertrand has expressed concern, whenever the price of gold has sharply doubled in history, it often signals a significant turning point for the political and financial systems, and this transition of the old order is likely to trigger greater social unrest and economic crisis.

In a world where inflation masquerades as prosperity and currencies are repriced, Bitcoin is expected to become the purest and most convenient form of capital preservation, allowing the current narrative of devaluation to continue.

This article discusses how inflation creates an illusion of prosperity in the stock market: the US stock market, priced in gold, has stagnated since the dot-com bubble. It first appeared in Chain News ABMedia.