2025 TradFi Market Review: The Debasement Trade

As crypto becomes increasingly institutionalized and converges with traditional finance, CoinEx Research has prepared this TradFi market review for 2025 to provide crypto-native investors with a clearer macro and cross-asset perspective.

At a high level, while the prevailing retail narrative suggests that 2025 was defined by U.S. equities and AI dominance, a granular look at the data reveals a different reality. The true story of 2025 was the debasement trade, a shift away from U.S. assets and fiat currency, as well as global capital reallocation. In our view, four major stories better summarize global market performance in 2025.

Global Equities Outperformed the U.S. Market

Most global equity markets delivered strong performance in 2025, and notably, the majority of major markets outperformed the S&P 500, which returned 17.9% for the year.

In other words, outside the U.S., equity investors broadly captured stronger returns. From an asset allocation perspective, this highlights that the dominant market opportunity in 2025 was not concentrated in U.S. equities, despite the strong media focus on U.S. technology and AI stocks. The capital rotation was undeniable: money flowed out of the crowded U.S. trade and into undervalued global markets.

The Fixed Income Trap and Risk-Adjusted Returns

The prediction that "equities outperform fixed income" is standard, but the magnitude of the divergence in 2025 was stark. Despite rate cuts that typically buoy bond prices, fixed income remained a value trap. The 10-Year U.S. Treasury returned roughly 9%, split evenly between yield and price appreciation. In our view, the popular TLT ETF (20+ Year Treasury Bond) was a long-duration failure — it failed to act as a defensive hedge, returning -0.2% while still subjecting investors to a 11% drawdown.

Meanwhile, we also highlight the importance of risk-adjusted performance, meaning "return per unit of risk." While the sharpe ratio is the formal indicator, for simplicity, we can roughly compare the return/max drawdown ratio across assets. By this simple measure, gold was clearly the strongest performer on a risk-adjusted basis in 2025.

It is also worth emphasizing that 2025 was historically a very strong year for risk assets, yet major equity indices such as the S&P 500 and the Hong Kong market still experienced drawdowns close to 20%. This reminds us that conviction, or a hodler mentality, is mathematically essential to capture long-term gains. Weak hands were shaken out; patient capital was rewarded.

Gold vs. Bitcoin: The Tale of Two Safe Havens

Among all major asset classes, precious metals were the clear winners in 2025. While silver delivered an explosive return of 142%, highlighting the intense global demand for hard assets, gold remains the primary benchmark for reserves, rising approximately 64%. In stark contrast, Bitcoin declined by around 5% over the same period.

Given that both gold and Bitcoin are commonly viewed as hedges against currency debasement, the divergence in performance naturally raises a serious question. The answer lies in the class of buyer. The 2025 gold rally was not retail-driven; it was driven by sovereigns. Central banks aggressively accumulated physical gold to diversify reserves away from the dollar. While we are seeing early headlines of nation-states accumulating Bitcoin, this trend remains in its infancy.

Bitcoin’s parabolic moment will likely only trigger when we see central bank accumulation shift from "experimental" to "systemic." Until then, gold remains the preferred vehicle for sovereign capital flight.

The Macro View: The Currency Illusion and Capital Wars

To fully understand 2025, one must adjust for currency. The returns cited above are denominated in USD. However, the U.S. Dollar structurally depreciated against major peers throughout the year, meaning that returns on U.S. assets were even weaker when measured in foreign currency terms. This further reinforces the view that global capital allocation in 2025 favored non-U.S. assets, both in equity markets and in reserve-type assets such as gold. In our view, the defining macro theme of 2025 was not U.S. stocks or AI, but rather the erosion of currency purchasing power and a gradual reallocation away from U.S. assets.

Beyond trade wars, we increasingly observed what Ray Dalio has described as a form of "capital war," where capital flows are influenced by geopolitical fragmentation, financial sanctions, and concerns over long-term fiscal sustainability. Under such conditions, diversification across regions and asset classes becomes not only a return-seeking strategy but also a form of risk management.

Outlook 2026: Positioning for the Turnaround

The narrative of "De-dollarization" and "Debasement" is no longer a fringe theory — it is the dominant macro driver. U.S. equity valuations remain stretched relative to global peers, and the geopolitical backdrop suggests continued volatility.

We think non-U.S. assets will continue to see outperformance as global capital reallocation persists and valuation gaps remain wide. Gold is likely to remain structurally supported under this regime. In the meantime, we project a catch-up for Bitcoin in 2026. As global liquidity conditions improve and institutional inflows from the TradFi sector mature, BTC is poised to catch up to the debasement narrative that gold monopolized in 2025.

In an environment of currency debasement, cash is the riskiest asset. 2026 will demand rigorous asset allocation. The convergence of TradFi and Crypto is not just about technology — it is about the search for value in a world of depreciating fiat.

Disclaimer

The content provided in this report is for illustrative purposes only and is intended to offer insights into the cryptocurrency market. It is not, and should not be interpreted as, investment advice or recommendations. The information contained herein is based on sources believed to be reliable; however, we do not guarantee its accuracy, completeness, or suitability for any purpose, and it should not be relied upon as such. Any opinions expressed reflect a judgment at the date of publication and are subject to change without notice. Readers are advised to conduct their own research and due diligence and, where appropriate, seek professional advice before making any investment decisions. The authors and publishers of this report accept no liability for any loss or damage arising from the use of the information provided.

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