The price of Bitcoin and gold is surging after the Trump administration’s bond market intervention scared investors away from the dollar.
The cryptocurrency rose by more than 5pc to more than $77,300 (£56,700) on Friday, putting it on course for its best week in more than three years.
Gold also gained 1.5pc to hit $4,585 a troy ounce, having risen by 14pc over the past month.
It comes after Scott Bessent, the US treasury secretary, doubled his purchases of long-term bonds on Wednesday.
The move was designed to steady the market after government borrowing costs had jumped sharply, although it also sent the US dollar plunging.
This has compounded existing pressure on the dollar owing to inflation fears.
Sterling rose to its highest price since February against the greenback, with £1 now buying more than $1.36. The euro is also up at $1.17, its highest level since May.
‘A currency crisis’
Robin Brooks, a senior fellow at the Brookings Institute, said that the decision to borrow more money in short-term debt markets to buy long-term debt “is the clearest sign yet that the US is following Japan on its path towards currency debasement”.
He said: “When fiscal policy is out of control, governments can obviously do many things to cap yields, but this just puts depreciation pressure on the currency because markets don’t get paid the kind of risk premium they desire.
“What would be a debt crisis thus morphs into a currency crisis, which is why the yen has been falling for so many years.”
As a result, investors are buying into other assets such as precious metals and crypto.
Mark Dowding, at RBC BlueBay Asset Management, said the move to control US borrowing costs risks leaving Americans with higher inflation, resulting in the move away from the dollar and into gold.
He said: “At a time when the US fiscal deficit remains extremely elevated, there remains zero appetite for fiscal consolidation.
“Yet, it appears that the administration is inclined to do whatever it takes to ensure that borrowing costs don’t spiral higher.”
Mr Dowding added: “It is interesting to observe broad-based weakening in the US dollar and a sharp move higher in gold prices in the wake of the Treasury’s recent actions.”
Elwin de Groot, at Rabobank, said that while a fall in the dollar because of lower yields might be expected, “this time, gold and crypto also rallied, suggesting concern about fiscal credibility and the perceived management of borrowing costs”.
It comes after the US national debt surged above $40tn for the first time, alarming investors who fear the White House will not curb runaway spending.
This has led to higher interest rates for the US and a range of other indebted countries, including the UK.
Trying to reduce those interest rates through market interventions risks weakening the dollar, Mr de Groot said.