Key Insights
Luke Gromen continues to assert that governments will depend on inflation and depreciating currencies to cope with substantial debt.
He expresses caution regarding Bitcoin in the near term, anticipating a potential movement towards the $40,000 mark in 2026.
Key concerns include Bitcoin’s underperformance relative to gold, deviations below significant moving averages, and the impact of “quantum risk” discussions on market sentiment.
The main takeaway is to adopt a methodical approach: Monitor the BTC-to-gold ratio, utilize a straightforward trend filter, and keep an eye on ETF flows rather than imitating others’ trades.
Who is Luke Gromen?
Luke Gromen is a global macro analyst who established FFTT (Forest For The Trees) in early 2014 and produces macro research for investors, including his Tree Rings offering.
His central thesis revolves around the “debasement trade.” Simply put, when a nation incurs excessive debt, it can alleviate that burden by allowing inflation to occur and the currency to lose value over time. This process drives some investors toward assets that are more difficult to produce in unlimited quantities, such as gold and Bitcoin.
As of December 2025, Gromen maintains his stance on the debasement perspective. However, his short-term outlook on Bitcoin (BTC) has shifted.
On the RiskReversal podcast, he noted that BTC appears weak enough that a decline toward the $40,000 range in 2026 could be probable. He also indicated that Bitcoin positions may be scaled down as circumstances worsen, suggesting that gold and certain equities currently better reflect the debasement theme than BTC.
He identifies a number of practical warning signs: Bitcoin lagging behind gold, falling below critical moving averages, and increasing discourse around quantum risk.
Understanding “debasement” in Gromen’s Terms
When Gromen refers to “debasement,” he means the following: If a government carries excessive debt, it can gradually lighten that burden by permitting inflation to rise and the currency to depreciate. While the nominal debt remains constant, its real purchasing power diminishes.
What ultimately matters is this outcome. In a debasement scenario, people often seek assets that are harder to produce in abundance, like gold and at times Bitcoin, due to their perceived better ability to maintain purchasing power compared to cash.
In essence, Gromen believes that the effects of debasement will eventually influence Bitcoin.
Gromen also emphasizes the importance of time. He does not consider this a fleeting trade with a defined endpoint; rather, it’s a lengthy process where setbacks can occur without signaling the end of the overarching thesis.
Did you know? “Debasement” originally referred to a literal practice. In ancient and medieval times, rulers diminished the precious metal content of coins to extend the money supply by either shaving off small amounts or melting down coins and mixing in cheaper metals. Although the coins retained the same face value, they contained less precious metal, resulting in people effectively receiving “lighter” money.
Reasons for Gromen’s Current Stance on Bitcoin
Gromen’s message for 2025 is clear: The notion of debasement remains valid, yet Bitcoin may not be the optimal investment in the short run. This is why he discusses reducing BTC exposure while remaining optimistic about the overall macro trend.
On RiskReversal, he contends that gold and some equities currently represent the debasement theme more effectively than Bitcoin. He outlines a scenario where BTC could decline to the $40,000 range in 2026.
The first indicator he mentions is Bitcoin’s price in gold. He considers a failure of BTC to reach new highs relative to gold a cautionary sign. The BTC-to-gold ratio provides crucial context. The ounces of gold needed to purchase one BTC dropped to around 20, down from about 40 ounces in December 2024. This suggests that the “hard asset hedge” spotlight has shifted away from Bitcoin for the time being.
The second indicator is technical analysis. He cites falling below critical moving averages as a factor making the risk-reward ratio less appealing. He doesn’t claim “Bitcoin is dead,” but argues that the current chart conditions do not favor heavy investment.
The third element is macroeconomic pressures and narratives, especially concerning quantum risk. He notes that increasing discussions surrounding quantum computing pose another challenge. This topic arises partly because of proposals and discussions about transitioning Bitcoin away from older signature schemes during a longer post-quantum migration path.
While he isn’t alone in this cautious view, it’s notable that he doesn’t represent everyone’s perspective. Some analysts focused on Bitcoin, such as on-chain analyst Checkmate and researcher Troy Cross, argue that this appears to be selling into weakness, treating the quantum risk discussion more as an internet narrative than an immediate concern.
Tracking Gromen’s Indicators
If you want to engage with this concept without mimicking someone else’s trades, take a systematic approach. One method is to check the same three indicators weekly: BTC against gold, trend analysis, and ETF flows.
1) Begin with BTC priced in gold as your “store of value” benchmark
Gromen’s caution is less about Bitcoin priced in fiat and more about Bitcoin underperforming relative to gold. If the BTC-to-gold ratio keeps declining, it’s challenging to assert that Bitcoin is currently the key “debasement hedge,” even if the long-term narrative holds true.
2) Incorporate a trend filter for objectivity
A simple option is the 200-day simple moving average (200D SMA). It’s widely regarded as a rough divide between long-term uptrends and downtrends as it smooths fluctuations over approximately 200 trading days.
The key takeaway isn’t that the 200D SMA is infallible; it’s about predefining what “trend damage” means to avoid emotional decision-making during downturns.
3) Use ETF flows as supportive data, not as a primary indicator
For a quick public gauge, you can monitor daily US spot Bitcoin exchange-traded fund (ETF) flows via Farside’s tables.
While flows won’t clarify every movement, sustained outflows alongside poor BTC-to-gold performance and a broken trend create a “three strikes” situation that, within Gromen’s framework, would justify decreasing exposure.
A weekly check can be as straightforward as:
BTC-to-gold: Is it improving or declining?
Trend: Is it above or below the 200D SMA?
ETF flows: Are the latest movements inflows or outflows?
Did you know? The simple moving average (SMA) represents the average of the last N closing prices – for instance, the past 200 days. It’s termed “moving” because each new day updates the calculation by replacing the oldest data, allowing the line to adjust continuously and reduce short-term noise.
How to “fade BTC” while retaining the debasement narrative
In Gromen’s context, “fading Bitcoin” concerns risk management. You may still believe in the concept of debasement while recognizing that Bitcoin may not currently be the best representation of that belief.
Here’s one way he frames this idea, intended for educational purposes rather than as actionable advice.
1) Distinguish between “core” and “tactical” strategies
“Core” refers to assets you are prepared to hold through extended market cycles.
“Tactical” signifies the assets you trim when conditions deteriorate, based on relative performance and trends.
This approach essentially embodies rebalancing logic. A structured methodology can mitigate risk and may yield a modest increase in returns over time.
2) Specify conditions for re-adding BTC
Keep it linked to the same three indicators:
BTC-to-gold stops declining and begins to trend upward.
Price recovers key trend benchmarks, such as surpassing the 200D SMA.
ETF flows cease showing significant selling pressure.
3) Acknowledge practical limitations
In markets characterized by higher volatility and lower correlation, the balance between how much you drift from your strategy versus how frequently you trade becomes increasingly pronounced, indicating that you may need wider tolerances and less frequent adjustments. Wellington has directly addressed this in its conversation about rebalancing challenges.
Quantum Risk: Differentiating Market Anxiety from Genuine Timelines
Quantum risk is significant for two main reasons.
First, it poses a genuine, long-term security concern. If powerful quantum computers achieve practical scalability, some of today’s cryptographic methods will need upgrades.
Second, it represents a short-term market narrative. Even if the technology is not on the horizon, headlines can still intimidate investors and encourage them to reduce risk. This is why it appears in Gromen’s list of factors contributing to Bitcoin’s fragile state in the short term.
For a calm understanding of timing, a16z crypto contends that the emergence of a cryptographically relevant quantum computer in the 2020s is highly improbable.
Nevertheless, transitioning large systems to post-quantum cryptography is operationally challenging and may take years. The National Institute of Standards and Technology finalized its first post-quantum cryptography standards in August 2024, introducing FIPS 203 (ML-KEM) for key exchange and encryption, along with FIPS 204 (ML-DSA) and FIPS 205 (SLH-DSA) for digital signatures. Its adoption across industries is projected to take considerable time.
In the Bitcoin ecosystem, developers are already engaged in discussions about potential migration strategies. A notable example is a Bitcoin-Dev mailing list thread detailing an informational post-quantum signature proposal often referred to as Bitcoin Improvement Proposal 360. Additionally, Bitcoin Optech maintains a dedicated “quantum resistance” page to monitor advancements in this field.
The Conclusion
Gromen’s message becomes clearer when you distinguish the macro regime from the investment vehicle.
The regime perspective is debasement: High-debt governments are inclined to permit inflation and currency depreciation to lessen the real debt burden over time.
The tactical perspective is vehicle selection: He questions whether Bitcoin is currently the optimal means to express that belief.
In his view, Bitcoin can still align with the long-term debasement narrative while also being a position that can be reduced when the conditions deteriorate—especially if BTC is trailing gold, the chart indicates damage, and a distracting narrative like quantum risk affects sentiment.
By tracking BTC against gold, applying a straightforward trend filter, and conducting a basic flow analysis, you can grasp the analysis without devolving into idol worship or panic trading.
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