Disclaimer: This is not financial advice. Anything stated in this article is for informational purposes only and should not be relied upon as a basis for investment decisions. Triton may maintain positions in any of the assets or projects discussed on this website.
TL;DR
Time for BTC to Shine?
We are going to take a quick pause from our ongoing Compendium series to briefly shift focus to the global macro environment right now.
It likely comes as no surprise to readers that the global uncertainty caused by a seemingly scattershot tariff policy rollout has rattled international markets. Any partisan views aside – whether one believes this is the genius of a master deal maker or the missteps of an imbecile – we can likely all agree that global markets largely hinge on whatever the next statement that comes out of the White House happens to be. As we have seen over the past week, one Truth Social post can swing the market by trillions.
All of this uncertainty and the knock-on impacts such as front-running imports, rising inventories held in bonded warehouses, cratering energy prices, severely deteriorating consumer sentiment and companies pulling earnings outlooks, have together created a fog of war for anyone trying to ascertain a 3-month outlook, let alone a 3+ year view required to make any capital allocation decisions. The increasing politicization and the market’s perceived risk to the Fed’s independence only serves to exasperate this unease.
Source: Jim Bianco via X. Note the violent divergence we just saw
The net result of all of this is simply fear and unfortunately what appears to be a growing distrust in US stability (in the near term, at least). Divergence in US bonds, historically seen as the global safe haven asset, and gold while the equity markets and USD sell off is a historically odd combination. A few weeks ago, we suggested that taking the stability of US policy and thus the USD as a given may not be as ironclad as in the past:
And what may be most startling for investors is the rapidity of these movements and a lack of confidence in what a new normal represents: back to where we were a few weeks ago, or is this truly a fundamental restructuring of global trade? Now, whether these short-term technical movements are completely absurd in the grand scheme of history is more difficult to accept (see below), but it does definitely represent a marked change in direction from the path we had been on over the past few years.
Looking back 60 years, the movement in DXY vs US 10yr yields looks much noisier over time
We do not claim to have an edge in predicting what Trump or Xi may do next. Rather, we highlight all of this uncertainty to remind readers just how much global markets rely on stability and the predictable operations of the US and its political system. It is also in this context that we want to remind readers of some of the ideological underpinnings of Bitcoin and crypto and why its core value propositions of decentralization and codified monetary policy resonate so strongly with people around the world. There is no single entity that can change its issuance or supply, cut another off from using it, or unilaterally damage the value of it for another holder. It supersedes nation states, like gold.
Can one honestly say they are certain what the US Treasury, Fed, and other central banks around the world are going to do over the next 6 months and what that means for each currency? Or even who will lead the Fed? How much stress is the financial system going to come under, and will bailouts be needed? If the recession happens that many are now predicting, what does that mean for monetary and fiscal responses? Heavy debasement seems more likely than further austerity given current trajectories, but who knows?
And that is the fundamental question here: who knows?
An organization that compiles industry reports on manager outlooks recently asked us how we expect 2Q to play out. A section of our response is below:
…we expect everything to trade as a pseudo-macro asset until there is improved clarity around trade policy and (believable) long-term positioning to provide enough confidence for firms to start making capital allocation decisions again.
Bitcoin trades as a curious blend of leveraged equity and store-of-value and should continue to flex its relative stability vs. the rest of the crypto market…Relief rallies on tariff changes (e.g. shifts in tariff levels and trade deals with countries representing <0.5% of GDP) may provide momentary moves up and there will be moments of idiosyncratic dispersion within alts... But as we have seen, this could all change with one announcement from the White House.
What exactly do we mean by that? If we compare how BTC (black) has performed relative to tech (NDX, green) and store-of-value (gold, gold).
Over short time periods, BTC can trade as a blend of tech and store of value leading to outperformance against equities. But it still flashes a tendency towards high correlation with equity indexes over other periods.
But over long periods, strong correlation to either equities or gold is tougher to glean from the data, and the periodic and almost cyclical nature of that relationship becomes clear. Given this, it is tough to read into the latest trends too strongly.
BTC correlation vs. Nasdaq, S&P500 and Gold via The Block
But – is now the time for BTC to shine? It is easy to write pieces arguing why Bitcoin has all the hallmarks of a digital version of gold – a supply constrained, neutral asset that can serve as a safe haven in times of market duress. But the proof eventually needs to be in the pudding. More colloquially: time to put up or shut up.
Historically, gold and US treasuries have played this role; when investors panic and want to derisk, they flee to those two assets. But now, at a time when many investors around the world start to perceive chaotic fiscal policy from the US government, apparent disregard for the US courts by the executive branch, and a weakening of general market outlook for the US, the question becomes: where is actually safe?
Gold has passed this test with flying colors as investors and central banks around the world are aggressively building allocations. Treasuries, quite simply, appear to be failing. At least for now.
And Bitcoin? Well, it is a tiny, short sample size, but the markedly aggressive divergence from equity correlation at a period of pronounced market stress is worth noting. Maybe this is a short-term dislocation and trends will resume – and likely over the intermediate term once markets stabilize, this will be the case – but this might also be the strongest indication we have yet seen that Bitcoin has crossed that chasm and has truly found itself as that neutral alternative, safe-haven asset that no one single policymaker can influence or control.
Gold continues to shine. Is it time that Bitcoin finally does too?
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