This episode dissects the volatile macro landscape triggered by US tariff policies, exploring the potential erosion of US dollar dominance and the strategic implications for Bitcoin and other crypto assets amidst rising global uncertainty.
Navigating a Turbulent Macro Week
- The hosts kick off by acknowledging the intense market volatility of the past week, setting the stage for two distinct guest segments exploring the chaotic macro environment.
- Initial discussion touches on Ben Hunt's sobering perspective potentially signaling an end to US exceptionalism, prompting reflections on long-term geographical diversification.
- The prevailing market condition is framed as a "trader's paradise, investor's hell," highlighting the extreme volatility that benefits short-term traders but challenges long-term holders.
- Host Jordy introduces his thesis that Bitcoin could be the "fastest horse" over the next six months, driven by potential US dollar weakness and global diversification flows away from the dollar into assets like gold and potentially Bitcoin, stating, If even a little bit goes into Bitcoin, I think we could see something like very reflexive and very very powerful.
- The sentiment is echoed that if the core Bitcoin thesis as a non-sovereign store of value is ever to play out, the current environment presents a prime opportunity.
Ben Hunt on Pax Americana Under Threat
- Ben Hunt, founder of Epsilon Theory and a long-time market commentator (blogging since 2013), joins the discussion. He expresses admiration for the original crypto ethos—autonomy, free-thinking, long-term horizons—but critiques the current state, viewing assets like Bitcoin (or "Bitcoin TM") as having been co-opted into a speculative "number go up game," similar to how gold was institutionalized via ETFs like GLD.
- Ben outlines the historical "Pax Americana" regime: a post-WWII system built on the US dollar as the global reserve currency and the US military as the world's security guarantor. This arrangement allowed the US to trade "pieces of paper" (dollars) for tangible goods (oil, semiconductors, manufactured products). Pax Americana refers to this period of relative global peace overseen by US economic and military dominance.
- The Trump administration's "America First" plan aims to dismantle this multilateral system, viewing allies as "free riders" and seeking to renegotiate trade and defense arrangements bilaterally. Ben argues this is a mistake, stating, Imagine what kind of idiocracy we have to be living in where you basically have like a credit card where you know you can just spend unlimited and you're like I need to swipe my card like this is a bad deal.
- While acknowledging valid criticisms of the old system (e.g., wealth concentration among oligarchs), Ben warns that blowing it up risks moving from a mutually beneficial coordination game to a "prisoner's dilemma" where all major powers (US, China, Europe) end up worse off.
Dollar Decline, Not Collapse: A Choice Emerges
- Addressing whether a middle ground exists, Ben clarifies he doesn't foresee a dollar collapse but rather a scenario where the dollar becomes just another choice among global currencies, losing its unique, unquestioned reserve status. Its dominance would decrease, akin to Bitcoin dominance falling in the crypto market.
- This shift implies US Treasuries are no longer perceived as the global risk-free rate (the theoretical return of an investment with zero risk). Consequently, the market demands a higher premium for lending to the US, particularly long-term, leading to a bear steepener in the yield curve (where long-term rates rise faster than short-term rates, and all rates move higher).
- Ben uses analogies—the US as the referee, the Monopoly bank, or the house in a poker game—to illustrate the advantageous position the US is potentially giving up by moving from rule-setter to just another (albeit powerful) player.
Critiquing the White House Narrative & Market Reactions
- Ben sharply criticizes the White House statement (attributed to advisor Steve Moran) suggesting the reserve currency status is a burden, calling the logic "batshit crazy" and comparing its underlying theory to "pure Marxism" or "Bernie with borders."
- His baseline forecast isn't apocalyptic war but a "muddle through" scenario characterized by lower global growth, lower productivity, and higher risk premiums (cost of money). The sheer complexity of managing numerous bilateral negotiations dramatically increases the chance of policy mistakes and unintended consequences.
- This heightened uncertainty fuels demand for assets like gold, viewed not as a currency alternative but as insurance policy against central bank and government error. This aligns with observations (e.g., by Luke Gromen) of central banks increasing gold purchases relative to Treasuries.
- Recent market turmoil, including the dollar's sharp fall (as measured by the DXY index) even after Trump's partial policy reversal, and the widening spread between German Bunds and US Treasuries, suggests markets are starting to price in higher US sovereign risk, similar to how PIGS (Portugal, Italy, Greece, Spain) debt traded during the Eurozone crisis. The Fed's current stance, unlike the ECB's "whatever it takes," offers no immediate bailout for fiscal policy missteps.
Potential Reforms and Addressing Inequality
- Ben agrees that underlying issues like rising inequality, potentially exacerbated by the Cantillon effect (where newly created money benefits those closest to the source, like banks and large corporations), need addressing. Define Cantillon Effect: The idea that the effects of monetary expansion are unevenly distributed, benefiting those who receive the new money first.
- He proposes alternative reforms: means-testing and raising the retirement age for Social Security, reducing defense spending, potentially nationalizing healthcare payers (insurance companies), and implementing a $1 million lifetime capital gains tax exemption to encourage broader wealth accumulation ("A thousand millionaires is so much better than one billionaire").
- He views these as more effective than broad income tax cuts (like the proposed $150k exemption) or corporate tax reductions, arguing the focus should be on incentivizing productive investment and controlling entitlement spending.
Bitcoin as the "Fastest Horse"? Asset Allocation Shifts
- Transitioning from Ben's macro analysis, the hosts revisit Jordy's thesis positioning Bitcoin as potentially the "fastest horse" in the current environment due to its smaller market cap and powerful narrative potential amidst dollar concerns.
- Jordy outlines expectations: Gold likely sees slow, steady gains; Ethereum (ETH) faces choppy trading; Bitcoin could experience sharp, reflexive rallies if diversification flows accelerate.
- The discussion turns to Bitcoin Dominance (BTCD), the measure of Bitcoin's market cap relative to the total crypto market cap. Jordy anticipates BTCD rising further, arguing that most altcoins still lack clear use cases beyond speculation or niche payment applications, making Bitcoin the primary beneficiary of institutional or macro-driven inflows into crypto.
- Whether Bitcoin can lift the rest of the crypto market remains uncertain. Potential correlation provides a tailwind for alts, but headwinds exist from token inflation, large upcoming unlocks, and the general "risk-off" sentiment potentially favoring Bitcoin over more speculative assets. ETH's recent performance is noted as particularly weak.
- The strategic implication is to potentially hold cash for now but be ready to deploy it aggressively if signs emerge of the Federal Reserve intervening with Quantitative Easing (QE) or other stimulus measures, which would likely devalue cash and boost risk assets. Define QE (Quantitative Easing): A monetary policy where a central bank purchases securities from the open market to increase the money supply and encourage lending and investment.
Jonah Van Bourg: Trading the Post-GFC Stimulus Era
- Jonah Van Bourg, trader and host of the ThousandX podcast with experience at Lehman Brothers, Goldman Sachs, and VTOL, offers a trader's perspective shaped by the post-Global Financial Crisis (GFC) era. Define GFC (Global Financial Crisis): The severe worldwide economic crisis that occurred from 2007-2009.
- Jonah's core thesis is that since the GFC, central banks and governments consistently intervene to prevent deep market downturns ("underwrite risk"), creating a persistent "buy the dip" environment fueled by stimulus. He believes this dynamic remains intact: I tend to believe that until that post-GFC paradigm reverses uh it's you know you buy dips and you ride uh momentum driven rallies.
- He argues that policymakers lack the political will or mandate to allow the markets to endure the full pain of accumulated imbalances, making sustained crashes unlikely unless there's a radical political shift (e.g., electing highly socialist figures).
Navigating the Tariff Turmoil: Calling the Bluff
- Jonah approached the initial tariff announcements with skepticism, viewing political tough talk as something to be faded (bet against). He bought into the market during the "Liberation Day" speech, expecting a policy reversal.
- The unexpectedly high tariff figures presented by Trump caused a moment of shock and panic. Realizing the supporting data was questionable (fake mumbo jumbo), he held his positions through the drawdown rather than selling into the fear.
Bitcoin's Relative Strength & Shifting Perceptions
- Jonah was struck by Bitcoin's initial resilience while equities plummeted. He interprets this not just as a lag but potentially the first sign of a structural shift where Bitcoin acts as a non-sovereign, decentralized asset gaining traction in a fragmenting global order.
- Analyzing the BTC/S&P ratio, he argues that Bitcoin merely holding stable during a major equity sell-off is itself a bullish signal, suggesting it's being treated differently than just "levered equities." He notes, if it can even put in those two green candles at all that tells you that people aren't treating Bitcoin like levered equities anymore.
- While Jonah believes most institutional allocators will remain anchored to the S&P 500, he concedes that even minor portfolio shifts (e.g., 1% to Gold, 1% to Bitcoin) driven by waning confidence in traditional assets could have a massive price impact on BTC. He remains bearish on ETH's prospects in this environment.
- He points to gold's sharp sell-off late in the week, despite the risk-off environment, as a key indicator. This counterintuitive move signaled forced liquidations—where investors sell not by choice but due to margin calls or fund shutdowns—often marking a point of capitulation near market bottoms. Define Forced Liquidations: Selling assets involuntarily, typically due to margin calls or fund redemptions, often exacerbating price declines.
Trump's Strategy and Market Reactions
- Regarding Trump's motivations, Jonah suggests a combination of genuine intent (Trump clearly wants tariffs) and reactive maneuvering. He likely started with an extreme negotiating position, then reacted to the severe market backlash, realizing even he couldn't politically sustain a massive market crash.
- Trump's subsequent "great time to buy" tweet triggered Jonah's PTSD from a similar 2020 tweet that caused a massive, rapid oil price rally. His takeaway: You do not fade his tweets... It is a negative 10 sharp strategy to fade Trump tweets. He acted on this by buying Hyperliquid (HYPE).
- The discussion touches on concerns about potential insider trading around major policy announcements, distinguishing between trading on public information (like tweets) and potentially problematic trading based on non-public knowledge within government circles.
Trading Advice and Altcoin Strategy
- Jonah advises a long-term investment approach, using market volatility primarily to time entry points for desired assets or for tax loss harvesting, rather than attempting to day trade news headlines. Define Tax Loss Harvesting: Selling securities at a loss to offset capital gains tax liability.
- He believes retail investors have an edge over institutions due to longer time horizons and freedom from risk managers forcing liquidations during drawdowns.
- His altcoin strategy has shifted from "inverse alt season" (shorting weak projects) to selectively buying. He believes most altcoins, especially memecoins, are heading to zero. However, he made an exception for Hyperliquid (HYPE), a Decentralized Exchange (DEX), viewing its token buyback mechanism funded by trading fees as a form of "tokenized equity" in a real, cash-flow-generating business. His current crypto portfolio focus is BTC and HYPE, considering rotating out of Solana. Define DEX (Decentralized Exchange): A cryptocurrency exchange that operates without a central authority, allowing peer-to-peer trading.
Synthesizing Views: Dollar Weakness, Asset Divergence
- The episode contrasts Ben Hunt's view of a potential structural break from post-GFC trends with Jonah Van Bourg's belief in the continuation of the stimulus-driven "buy the dip" regime. Both guests, however, converge on the theme of US dollar weakness.
- The Lynn Alden chart comparing Berkshire Hathaway's long-term performance to gold is presented, illustrating how significant dollar debasement has muted nominal equity gains when measured against a hard asset like gold over decades.
- This reinforces the theme of wealth inequality driven by asset inflation, benefiting asset holders disproportionately.
- The final outlook suggests that while US stocks may perform adequately due to political incentives (401ks, voter sentiment), the current macro shifts could favor assets like gold and Bitcoin as potentially "faster horses" benefiting more directly from currency devaluation and global diversification trends. Mental resilience is emphasized as crucial for navigating the volatility.
Pasta: Market Memes and Signals
- The episode concludes with "pasta" (shared memes/jokes):
- Justin shares Brian Johnson's "red light therapy" meme, humorously depicting investors staring at red market charts, later updated to "green light therapy" during a brief recovery.
- Tiki highlights the "Sacks Signal," noting instances where optimistic tweets from David Sacks seemed to precede market downturns, reflecting crypto community P&L reveal jinxes.
- Jordy offers a "self-pasta," comparing crypto project missteps (like Kelsier's) to the perceived incompetence of Trump advisor Steve Moran managing the much larger "USD ticker," invoking Su Zhu's quote about incompetence being indistinguishable from 5D chess.
Conclusion
The episode underscores heightened macro uncertainty driven by US policy shifts, challenging traditional asset assumptions. The central theme of potential US dollar weakness demands strategic consideration for reallocating towards assets like Bitcoin and gold, requiring investors and researchers to closely monitor policy developments and relative asset strength amidst ongoing volatility.
