Investing – Mark E. Jeftovic is The Bombthrower

Deflationary Money Hits Different: Losing Half Its Price and Winning Anyway

Bryan Lutz — Tue, 14 Jul 2026 21:28:28 +0000

Written by Bryan Lutz, Contributor at The Sovereign Capitalist:

The FUD is back, baby.

Bitcoin is down nearly half from its 2025 high. And now, the obituaries are out of cold storage and back in heavy rotation. Sentiment surveys are scraping levels we haven’t seen since the 2022 crypto-winter, and the financial press has rediscovered its favorite genre: the Bitcoin post-mortem.

And this time they’ve got a chart to wave around. The Dow just had its best year against Bitcoin since 2022 – the Dow/BTC ratio has more than doubled off its August 2025 low, from 0.36 to 0.84.

Here it is. We’ll even draw the red line for them:

The Dow’s twelve-month winning streak against Bitcoin. Note what the line still hasn’t touched: 1.0.

Anyone holding through it felt every point. If you wanted to write the “Bitcoin is finished (again)” piece, this is the chart you’d lead with.

Notice what the line still hasn’t done, though.

It hasn’t touched 1.0.

After the worst sentiment stretch in years, after a ~45% drawdown, after twelve months of losing to the most boomer-coded stock index on earth, the entire Dow Jones Industrial Average still cannot buy one Bitcoin.

Against thirty of America’s biggest companies, the coin wins, with change left over.

Flip the fraction.

If that seems impossible, it’s because you’re reading the fraction the way CNBC wants you to read it:

Bitcoin

───────

$$$$$$$

Bitcoin as the numerator, dollars as the denominator, and the numerator just got cut in half. Case closed, right?

Wrong fraction. As Mark Jeftovic laid out in It’s the denominator, stupid, the entire point of Bitcoin is that it isn’t the thing being measured. It’s the thing you measure with. Put the index where it belongs:

DOW

───────

BITCOIN

Now extend the chart back a decade and hit the log button, which is a one-click jailbreak for fiat-denominated brains:

The Dow, denominated in Bitcoin. A 99% decline that survived every Bitcoin crash along the way, including this one.

In 2014 it took more than 40 Bitcoin to buy the Dow. At the 2015 extreme, 84.

Today: 0.83.

Measured in the new denominator, the Dow has lost roughly 99% of its value in twelve years, and the “comeback” everyone is celebrating shows up on that chart as a wiggle at the bottom of a cliff. Bitcoin just took its worst beating in years and gave back approximately none of a decade of relative gains.

That’s what deflationary money does. It hits different.

It’s about the maths

The Dow is priced in dollars, and dollars multiply, inflate, depreciate, and then die… which is the business model for the whole fiat system. M2 only ever pauses on its way up, every crisis gets solved with more of it, and index earnings get marked up in the same shrinking units.

Bitcoin’s supply schedule, meanwhile, doesn’t attend FOMC meetings. The halvings keep halving. Twenty-one million, take it or leave it.

Run the numbers since January 2000: the Dow is up 361% in dollars. M2 is up 394%. Divide one by the other and the twenty-six-year bull market vanishes: measured in the money itself, the index has gone nowhere. Every point of “Dow 52,000” that isn’t printer output rounds to zero.

The Dow and the money supply, same starting line, 26 years later. The index never got ahead of the printer.

So, the fraction has a numerator inflated by an expanding money supply, sitting on top of a denominator that does not expand. Run that equation for a decade and the line on the chart is the only possible output. The drawdowns – 2018, 2022, this one – are volatility inside the trend. And that trend is division between fiat money and Bitcoin.

A Dow’s comeback measured in a shrinking yardstick must sprint just to stand still. This year, it’s rallied hard in dollars. In Bitcoin terms, it clawed back a rounding error.

Same story, slower clock.

If this framework sounds familiar, it should. Gold holders have been living it since 1971, just at a different tempo.

In 2001 the Dow cost 42 ounces of gold. Today, with the Dow at nominal record highs and the algos doing victory laps, it costs 12.7 ounces. Two-thirds of the index’s gold-denominated value, gone, during a quarter century of “stocks always go up”.

Yes, gold and Bitcoin diverged this cycle. Gold at $4,142 while Bitcoin sits in a drawdown. They have different volatility profiles, and different adoption curves. Yet, they share the same denominator maths. One asset is the incumbent hard money, the other is the challenger still crossing the chasm. The DOW index can’t outrun either of them over any window that matters.

“Stocks at record highs” is mostly the yardstick shrinking. It is always has been.

Deflationary Money Still Undefeated this Decade

Here’s the thing about extreme bearish sentiment: it’s a report on the emotional state of leveraged tourists, not on the asset. Nothing about Bitcoin(or gold) changed this year. The supply schedule didn’t change. The halvings didn’t change. The $300+ trillion in bonds denominated in a melting currency didn’t change, except to get bigger.

The only thing that changed is the price, quoted in the old denominator, and the old denominator’s entire job description is to go down.

So, the mainstream news cycle might be right about one thing:

Deflationary money doesn’t win every year.

However, it does win every decade, and it’s undefeated.

Capital Controls Are Already Here and No One Seems to Care

Joey Tweeets — Wed, 18 Feb 2026 16:13:09 +0000

The Walls Are Going Up: Capital Controls Have Already Arrived in the First World

Originally via @JoeyTweeets on X

You’re not going to wake up one morning to a news alert that says “CAPITAL CONTROLS IMPOSED.” That’s not how it works in G20 countries. There’s no dramatic peso-style freeze, no Malaysian-style currency peg, no single event you can point to and say that’s when they locked it down.

Instead, what you get is a decade-long accumulation of regulations, reporting requirements, transaction thresholds, screening mechanisms, and surveillance infrastructure. Each one individually reasonable. Each one framed as fighting money laundering or terrorism or tax evasion. And collectively? They amount to the most comprehensive system of capital controls the developed world has ever seen.

Most people have no idea it’s happening because they’re still looking for the dramatic version.

I want to walk through what’s actually been built, what’s been legislated, and what’s already operational across the G20. Then I want to talk about why Bitcoin is the only credible response to what’s being constructed. Because the conversation about capital controls is stuck in 2015, and the reality on the ground is about five years ahead of the discourse.

The Surveillance You Didn’t Know Existed

Start with the thing nobody talks about at dinner parties: the FATF Travel Rule.

The Financial Action Task Force is an intergovernmental body with no direct legislative authority that nonetheless dictates financial policy in virtually every country on earth. Their enforcement mechanism is elegant. Countries that don’t comply get greylisted, which triggers enhanced monitoring and scares off foreign investment. Get blacklisted and you’re functionally severed from the global financial system. Soft power with a very hard edge.

In June 2025, the FATF adopted the most sweeping revision to its Recommendation 16 since the rule was created after 9/11. Here’s what it means in practice: for any cross-border payment above $1,000 USD/EUR, your name, address, date of birth, and account details must now accompany the transaction through the entire payment chain. Financial institutions are required to collect this, verify it, and transmit it. They’re also now required to implement verification tools to protect against fraud, which sounds benign until you realize it means every institution in the chain is validating your identity before your money moves.

The implementation deadline is the end of 2030, but many jurisdictions are moving faster. The EU’s Transfer of Funds Regulation already requires this information to accompany all crypto transfers between service providers. No minimum threshold. Send 50 euros worth of Bitcoin from one EU-regulated exchange to another and your full identity data goes with it.

As of early 2025, only 46% of FATF member countries had fully implemented the Travel Rule. But that number is misleading. The pressure to comply is immense and directional. Nobody’s moving away from implementation.

What this amounts to is a global transaction surveillance system. Not proposed. Operational and expanding.

They’re Coming For Cash, Too

Cash is the last truly private way to transact in the traditional system. So naturally, it’s being systematically restricted.

The EU passed Regulation 2024/1624 (the Anti-Money Laundering Package) with a vote of 482 to 47 in April 2024. Starting July 10, 2027, businesses across all 27 EU member states are prohibited from accepting or making cash payments above €10,000. This applies to single transactions or multiple payments over time that “appear to be linked.” The language is deliberately broad.

But the €10,000 cap is just the ceiling. Cash transactions above €3,000 now trigger mandatory identity verification: government-issued ID, KYC procedures, records retained for five years. Businesses must monitor payment patterns to detect structured transactions designed to circumvent the limits.

And many EU countries already go much further. France caps business cash transactions at €1,000 for residents. Greece at €500. Belgium at €3,000. The EU regulation explicitly allows member states to impose stricter limits.

Meanwhile, a new EU Anti-Money Laundering Authority (AMLA) is being stood up in Frankfurt with 400-plus staff to directly supervise anti-money-laundering controls at the 40 biggest financial institutions in the bloc. This is a brand new enforcement body with continent-wide reach.

The pushback is minimal but telling. Hungary amended its constitution in 2025 to include explicit cash protection provisions. Norway passed a law prohibiting businesses from refusing cash up to about €1,720. These are defensive moves by countries that can see where the trend is headed.

The standard rebuttal is that private transactions between individuals are still exempt. That’s true today. But the infrastructure to monitor, identify, and restrict cash transactions is being built for the commercial sphere first. History suggests it doesn’t stay there.

Your Government Now Controls Where You Invest

This is the one that should make everyone pay attention, because it’s capital controls in the most literal possible sense: governments telling citizens where they can and cannot put their own money.

For decades, countries screened inbound foreign investment. The US has had CFIUS since 1975. But starting in 2023, the paradigm flipped. Now they’re screening outbound investment. Where you, as a citizen, are allowed to deploy your own capital abroad.

The US went first. Biden’s Executive Order 14105 in August 2023 declared a national emergency and directed the Treasury Department to restrict investments by US persons into semiconductors, AI, and quantum technologies in “Countries of Concern” (currently China, including Hong Kong and Macau). The final regulations took effect January 2, 2025.

The definition of “US person” is worth reading carefully: any citizen, permanent resident, entity organized under US law including foreign branches, or any person in the United States. If you’re a Canadian visiting New York and you make an investment in a Chinese AI company from your hotel room, you’re potentially covered.

Then in February 2025, the Trump administration’s “America First Investment Policy” signaled a massive expansion, adding biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and anything tied to China’s Military-Civil Fusion strategy to the scope. That’s not narrowing. That’s most technology-adjacent investment into China.

The EU is following the same playbook on a slightly delayed timeline. In January 2025, the European Commission published a Recommendation urging member states to review outbound investments in semiconductors, AI, and quantum, retroactively back to January 2021. By December 2025, the Council and Parliament reached a political agreement on a revamped Foreign Investment Screening Regulation as part of the EU’s new “Economic Security Doctrine.”

The UK updated its National Security and Investment Act guidance in May 2024 to clarify that it applies to outward direct investment.

This always starts with national security. Semiconductors, AI, quantum. Nobody’s going to argue those aren’t sensitive. But the scope always expands. The Trump administration’s February 2025 expansion proved that within months. And now more than 100 jurisdictions worldwide apply some form of investment screening.

When your government can review, delay, or block where you invest your money, that’s a capital control. Full stop.

The Automatic Reporting Machine

Here’s something that’s been running for years and most people either don’t know about or have normalized: your bank is already reporting your financial information to foreign governments. Automatically. Annually. Without a warrant or your consent.

Two frameworks do this.

FATCA (the Foreign Account Tax Compliance Act) has been in force since 2010. Every foreign financial institution on the planet must identify US persons and report their account information to the IRS. Refuse and you face a 30% withholding tax on US-source income. It’s compliance through coercion of the global banking system.

CRS (the Common Reporting Standard) was developed by the OECD at the request of the G20 and went live in 2017. Over 100 countries participate. If you hold a financial account in any participating country where you’re not a tax resident, the institution reports your information (balances, interest, payments) to local tax authorities, who share it with your home country. Automatically. No permission slip.

Unlike FATCA, which targets US persons specifically, CRS covers everyone who holds an account outside their country of tax residence. It’s broader, and it has no minimum threshold for new accounts.

And now the net is expanding to crypto. The OECD’s Crypto-Asset Reporting Framework (CARF) is being adopted by jurisdictions globally. The UK enacted CARF regulations effective January 1, 2026. This closes what was the last significant gap in the automated reporting regime.

Audit cycles have tightened dramatically. Large financial institutions now face reviews every 18 to 24 months, down from 3 to 5 years. Tax authorities are deploying AI to detect anomalies in the data.

Between FATCA, CRS, and CARF, if you have a bank account, investment account, or crypto account virtually anywhere in the developed world, your home government knows about it. The system runs in the background, year after year, with zero friction and zero transparency to the account holder.

CBDCs: The Infrastructure for Programmable Money

137 countries and currency unions representing 98% of global GDP are now exploring Central Bank Digital Currencies. There are 49 active pilot projects. 16 G20 nations are in development or pilot.

China’s e-CNY is the furthest along: 2.25 billion digital wallets, active retail use, and a cross-border platform (Project mBridge) connecting banks in China, Thailand, the UAE, Hong Kong, and Saudi Arabia. India’s e-Rupee grew 334% in a year. The ECB is deep into preparation for a digital euro. Russia is piloting the digital ruble.

Cross-border wholesale CBDC projects have more than doubled since the G7 sanctions on Russia. There are now 13. That’s not a coincidence. Countries watched Russia get partially severed from the dollar system and concluded they need alternative rails. Those rails are being built with surveillance capabilities baked in.

The US is the notable holdout on retail CBDCs. Trump’s Executive Order banned agencies from establishing or promoting one, and the House passed the Anti-CBDC Surveillance State Act. But the US is still participating in wholesale cross-border CBDC research through Project Agorá.

The programmability question is the one that matters most. Unlike cash or even bank deposits, CBDCs can theoretically be designed with spending restrictions, geographic limitations, expiration dates, or conditional access. Central banks insist they won’t do this. But the capability is inherent in the architecture, and the history of governments promising restraint in the use of new surveillance tools is not encouraging.

De-Banking: Financial Exclusion as Enforcement

Everything above is structural: legislation, regulation, infrastructure. De-banking is where it gets personal.

In 2022, during the Canadian Freedom Convoy, the government froze 76 bank accounts totaling $3.2 million under the Emergencies Act. A court later ruled this unconstitutional, but the precedent was set. Canada’s Banking Ombudsman opened 94 de-banking cases in 2024 and 105 in 2023, and openly admits it cannot challenge a bank’s decision or even tell the customer why their account was closed.

In the UK, the FCA found that banks were closing nearly 1,000 accounts per day. Over 343,000 in 2022, up from about 45,000 in 2017. Eight of the UK’s biggest banks closed 140,000 small business accounts in a single year.

The structural driver is the AML/BSA framework itself. Regulators have broad discretionary authority to impose massive fines on banks for inadequate “risk management,” assessed on subjective criteria. So banks de-risk aggressively. They’d rather lose a customer than face a regulatory action. And “reputational risk” became the catch-all justification for dropping anyone who might generate a headline.

There’s been some pushback. Trump signed an executive order in August 2025 ordering regulators to eliminate “reputational risk” from guidance and requiring banks to make decisions based on “individualized, objective, and risk-based analyses.” But the order doesn’t cover payment processors or credit card networks, the entities that have been among the most aggressive in ideological de-platforming. The structural incentives remain intact.

Canada: A Case Study in Real Time

Everything above describes the global system. But if you want to see how capital controls emerge in a country that considers itself free and democratic, watch Canada. Because Canada is building every layer of the stack simultaneously, and both major parties are contributing.

Start with what’s already operational. FINTRAC (Canada’s financial intelligence unit) underwent a massive expansion in 2024 and 2025. Two waves of new obligations hit reporting entities: the first in April 2025, the second in October 2025. The list of who must report to FINTRAC now includes title insurers, mortgage lenders, armoured car operators, and white-label ATM providers. Sanctions evasion was added as a reportable offence in August 2024, meaning any transaction suspected of being related to sanctions violations must be flagged. FINTRAC can now share information with the RCMP, CSIS, the CRA, the Competition Bureau, and foreign states. Penalties for non-compliance: up to $500,000 or five years imprisonment on indictment.

All of this was accelerated to align with Canada’s upcoming FATF mutual evaluation. Canada doesn’t want to get greylisted. So FINTRAC’s powers expanded faster than originally planned, and the scope of who counts as a “reporting entity” keeps growing.

Then there’s the Emergencies Act precedent. During the 2022 Freedom Convoy, the federal government froze 76 bank accounts worth $3.2 million. A Federal Court ruled the invocation unconstitutional, but the operational precedent was set: Canadian banks will freeze accounts on government instruction, instantly, without judicial review. The Banking Ombudsman later confirmed it cannot challenge these decisions or even explain them to affected customers. If you’re a Canadian who watched that happen and concluded the banking system will always be a neutral utility, you weren’t paying attention.

But the newer and more insidious developments are the soft capital controls now being proposed by both the Conservatives and the Liberals. These don’t look like capital controls. They look like tax incentives. That’s the point.

During the 2025 federal election, Conservative Leader Pierre Poilievre announced the “Canada First TFSA Top-Up”: an extra $5,000 in annual TFSA contribution room, but only if the money is invested in Canadian companies. The existing $7,000 limit remains unrestricted. The additional room is conditional on domestic investment. Poilievre framed it as patriotism: “rewarding patriotic Canadians who invest in Canadian businesses.”

He followed that with the “Canada First Reinvestment Tax Cut”: a full deferral of capital gains taxes on any asset sale, provided the proceeds are reinvested in Canada. Sell a property, sell stock, sell a business. No capital gains tax, as long as the money stays in Canada. Move it out of the country and the tax bill comes due immediately. The policy was proposed for a window from July 2025 through December 2026, with the promise to make it permanent if it produces “an economic boom.”

Read those two proposals carefully. The TFSA top-up creates a two-tier savings system: unrestricted room for the base amount, domestically restricted room for the bonus. The capital gains deferral creates an explicit tax penalty for moving capital out of Canada. Neither proposal prohibits foreign investment. But both use the tax code to make domestic investment cheaper and foreign investment more expensive. That is the textbook definition of a soft capital control.

And here’s the historical context that makes this more alarming: Canada has done this before. From 1971 to 2005, RRSPs were subject to a Foreign Property Rule that capped non-Canadian investments. It started at 10% of book value, rose to 20% in 1994, then 30% in 2001, and was finally abolished in 2005. For over three decades, Canadian retirement savings were legally required to be predominantly invested in Canadian assets. The rule was scrapped because economists demonstrated it hurt returns, concentrated risk in a small market (Canada represents less than 3% of global equities), and didn’t even meaningfully boost domestic investment. The mutual fund industry found derivatives workarounds, and the rule became a pointless drag on middle-class savers.

Now the political pressure is building to reimpose something similar. And this time it’s not just RRSPs.

On the Liberal side, Prime Minister Mark Carney’s government has been openly pressuring Canada’s “Maple Eight” pension funds (which collectively manage roughly $3 trillion in assets) to invest more domestically. Industry Minister Melanie Joly told fund managers to invest more of their assets at home as part of a broader push toward “economic nationalism.” Carney’s finance minister met with Maple Eight CEOs in Toronto in early 2025 to discuss new domestic ventures. The CPP Investment Board’s CEO publicly signaled interest in Carney’s proposed infrastructure projects: bridges, pipelines, utilities.

Currently, over 75 cents of every dollar managed by the Maple Eight is invested outside Canada. When you exclude government bonds, Canadian exposure drops to about 12 cents on the dollar. The political class sees $3 trillion in assets and wants to redirect them. Multiple senators and policy commentators have called for mandated domestic investment minimums, similar to rules in Austria, Belgium, Denmark, Germany, and South Korea.

Former Bank of Canada deputy governor Paul Beaudry warned this “arm-twisting” risks descending into “crony capitalism.” McGill finance professor Sebastien Betermier called mandated domestic investment “the equivalent of imposing a tax on pensioners.” The C.D. Howe Institute published a warning in early 2025 that reimposing foreign investment limits would hurt savers without benefiting the economy, exactly as the evidence showed when the RRSP foreign content rule was in effect.

But the pressure is bipartisan. It’s not just the Liberals. Poilievre’s capital gains deferral explicitly penalizes capital that leaves Canada. His TFSA top-up restricts bonus room to domestic assets. Quebec Premier François Legault pushed the province’s Caisse de Dépôt pension fund to invest in the local economy under his “Quebec Power” program. Alberta Premier Danielle Smith pursued withdrawing the province from the federal CPP to redirect pension money toward the oil and gas sector. The impulse to control where capital goes transcends party lines.

And none of this is being described as capital controls. It’s “economic nationalism.” It’s “standing up to Trump.” It’s “investing in Canada.” It’s “rewarding patriotic Canadians.” The language is always positive, always voluntary-sounding. But the architecture is unmistakable: tax incentives that reward domestic investment, tax penalties that punish foreign investment, political pressure on pension funds to redirect capital homeward, and a financial surveillance apparatus (FINTRAC) expanding its reach and powers every year. Canada already demonstrated in 2022 that it will freeze bank accounts without judicial review. It already had a 34-year history of legally restricting where retirement savings could be invested. And now both major parties are proposing new mechanisms to steer capital back inside the border.

If you’re Canadian and you think capital controls are something that happens in Argentina, you’re not reading the policy proposals coming from your own politicians.

Stack It All Up

None of these mechanisms were designed in isolation. Together, they form what I’d call a capital control stack:

Identity layer. You cannot open an account, transact above threshold, or hold assets without full identity verification. KYC, FATCA self-certification, CRS reporting. The system knows who you are.

Surveillance layer. Every significant transaction is automatically reported. CRS, FATCA, CARF, the Travel Rule, BSA suspicious activity reports. The system knows what you’re doing with your money.

Restriction layer. Governments can screen, delay, or block investment decisions. Cash usage is capped. The system can control where your money goes.

Enforcement layer. Non-compliance means account closure, financial penalties, or exclusion. The system can punish you.

Programmable layer (emerging). CBDCs provide infrastructure for direct, real-time control over how money can be used. The system could eventually dictate how you spend.

Each layer is individually defensible. Anti-money laundering. Counter-terrorism financing. Tax transparency. National security. Consumer protection. Nobody’s going to win an argument against any single measure in isolation.

But stacked together? This is a comprehensive apparatus for monitoring and controlling the movement of capital across the developed world. It’s not a conspiracy. It’s worse: it’s a consensus. Every G20 government is building the same thing, roughly simultaneously, using the same institutional frameworks (FATF, OECD, BIS, FSB) as coordination mechanisms.

Why Bitcoin is the Exit

If you’ve read everything above and your response is “well, I have nothing to hide,” I’d ask you to reconsider the framing. The question was never about having something to hide. It was always about having something to protect.

Every layer of the capital control stack depends on a single architectural assumption: that your money lives inside institutions. Banks hold your deposits. Brokerages hold your investments. Exchanges hold your crypto. Processors move your payments. And because your money sits inside these intermediaries, it’s subject to every regulation, reporting requirement, freeze order, and screening mechanism those intermediaries must comply with. The entire control apparatus is built on the chokepoint of institutional custody.

Bitcoin breaks that assumption. Not partially. Completely.

When you hold Bitcoin in self-custody, your wealth exists as information protected by cryptography. There is no intermediary holding it on your behalf. There is no bank to receive a freeze order. There is no account to close. There is no institution sitting between you and your money that can be pressured, fined, greylisted, or threatened into cutting you off. Your keys, your coins. That’s not a slogan. It’s a description of how the protocol works at a technical level.

Go back through the stack and test each layer against self-custodied Bitcoin.

The identity layer requires KYC at every financial institution you touch. But Bitcoin doesn’t require an institution. You can receive it directly, peer to peer. You can generate a wallet with no ID, no application, no approval. The network doesn’t know your name and doesn’t need to.

The surveillance layer depends on automatic reporting from institutions. FATCA, CRS, CARF, the Travel Rule: all of these mandate that institutions collect and transmit your data. A Bitcoin transaction between two self-custody wallets touches none of these frameworks. There’s no intermediary to file a report. No server that knows your tax residence. The transaction exists on a public ledger, yes, but the ledger doesn’t know who you are unless you volunteer that information.

The restriction layer (outbound investment screening, cash caps) depends on controlling access points. Governments can tell banks to block wire transfers, tell brokerages to reject certain investments, tell businesses to refuse cash above a threshold. But they can’t tell the Bitcoin network to reject a transaction. There’s nobody to tell. No CEO, no compliance department, no headquarters in a jurisdiction. A Bitcoin transaction clears because it’s valid according to the protocol’s rules, not because a compliance officer approved it.

The enforcement layer (de-banking, asset freezing) works because your money is held by entities that answer to regulators. Take your money out of those entities and the enforcement mechanism loses its target. This is not theoretical. During the Canadian Freedom Convoy, banks froze accounts because the government told them to. Bitcoin donations to the same cause continued to flow because there was no bank in the middle to receive the order. The government was reduced to asking exchanges to freeze specific addresses they could identify, a far more limited and difficult operation than calling a bank.

The programmable layer (CBDCs) is perhaps the most important contrast. Central Bank Digital Currencies represent the logical endpoint of the control stack: money that can be programmed with conditions, limits, and restrictions at the protocol level. Money that expires. Money that can only be spent in certain categories. Money that can be turned off. Bitcoin is the exact opposite of this vision. Its supply is fixed at 21 million. Its rules are set by consensus, not by central authority. Nobody can change the emission schedule, impose spending conditions, or program restrictions into your holdings. The monetary policy is written into the code and enforced by tens of thousands of nodes run by individuals around the world. No committee meets to decide whether to inflate. No regulator can impose conditions on how you use it.

This distinction matters more than most people realize. We’re not just talking about privacy or censorship resistance in the abstract. We’re talking about the basic question of whether your economic life requires ongoing permission from institutions and governments, or whether it belongs to you by default. Every other financial asset you can name (every stock, bond, bank deposit, or piece of real estate) exists within a legal and institutional framework that governments control. They can change the rules on taxation, restrict your ability to sell, freeze your account, or dilute your purchasing power through monetary expansion. You participate in the financial system at their discretion.

Bitcoin is the first asset in human history where that’s not the case. Not because of any legal protection (governments can and do regulate on-ramps and off-ramps), but because of how the technology works. The protocol doesn’t have a “comply with government order” function. It simply validates transactions according to mathematical rules.

Now, the obvious objection: “But you still need to buy Bitcoin through an exchange, and exchanges are regulated.” True. On-ramps are the weak point, and governments know it. CARF targets crypto exchanges specifically. KYC requirements at exchanges mean your initial purchase is tracked.

But here’s the critical difference. Once you withdraw Bitcoin to self-custody, you’ve moved from the regulated world to the protocol world. You’ve taken your wealth off the institutional rails that the entire capital control stack is built on. And unlike gold (try getting $50,000 in gold bars through airport security), Bitcoin can be moved across borders with nothing but a memorized seed phrase. No customs declaration. No wire transfer. No SWIFT message. No intermediary of any kind.

There’s a deeper point here that gets lost in the “number go up” discourse. Bitcoin’s value proposition isn’t really about price appreciation. It’s about optionality. In a world where every other form of savings is increasingly surveilled, restricted, and subject to institutional permission, Bitcoin gives you the option to step outside that system. That option has a value, and it increases every time a new regulation tightens the perimeter around traditional finance.

Think about what’s happened just in the last two years. Outbound investment screening went from nonexistent to covering most technology sectors. Cash caps were legislated across Europe. The FATF rewrote the rules on cross-border transaction surveillance. CARF closed the reporting gap on crypto held at exchanges. De-banking accelerated to industrial scale in the UK. CBDCs moved from research papers to 49 active pilots.

Each of those developments independently makes the case for holding an asset outside the traditional system. Taken together, they make the case overwhelming.

This isn’t about tax evasion or breaking laws. Most Bitcoiners pay their taxes and follow the rules. It’s about having a credible exit from a system that is, as I’ve documented above, methodically closing every other door. It’s about holding an asset that doesn’t require the ongoing cooperation of the banking system to retain its value and utility. It’s about having a Plan B that actually works when Plan A (trusting institutions to respect your financial sovereignty) fails.

And Plan A is failing. We can see it in the data. 343,000 accounts closed in the UK in a single year. Unconstitutional account freezes in Canada. Outbound investment restrictions expanding months after they’re introduced. Cash caps being legislated across Europe. Every year, the perimeter tightens.

Consider this question: if you lived in a country where the government had the ability to monitor every transaction you make, control where you invest, restrict how you use cash, close your bank account without explanation, and was building infrastructure to program conditions directly into the money itself, what kind of asset would you want to hold?

You’d want one that exists outside that system. One that can’t be diluted, frozen, programmed, or confiscated without your cooperation. One that works the same way regardless of which government is in power or what emergency they’ve declared this time.

There’s only one asset that fits that description. The capital control stack is the best argument for Bitcoin ever written, and the people building it don’t realize they’re writing it.

The Timeline Objection

Whenever I lay this out, someone says “most of this is years away.” But look at the dates:

FATCA has been running since 2010. CRS since 2017. Over 100 countries apply FDI screening today. US outbound investment restrictions went live January 2025. The EU cash cap is already law (2027 is just the implementation date). De-banking is happening at industrial scale right now. 49 CBDC pilots are running worldwide. The FATF Travel Rule revisions take full effect by 2030 but jurisdictions are implementing early.

The infrastructure isn’t coming. It’s here. What’s coming is the tightening: lower thresholds, broader scope, more aggressive enforcement, less tolerance for workarounds.

If you’re waiting for the dramatic moment to start paying attention, you’ve already missed it. The dramatic moment was spread across a decade of regulatory actions, each one too boring to make the news.

That was the point.

Follow Joey Tweeets on X here, sign up for the Bombthrower mailing list here.

The Debasement “Trade”

Mark E. Jeftovic — Wed, 08 Oct 2025 12:54:18 +0000

“Blue Horseshoe Loves Gold and Bitcoin”

Suddenly the likes of Goldman and JP Morgan are talking about this and the mainstream press are framing it as “the so-called Debasement Trade”

Bitcoiners, of course, have been talking about this for, well since the beginning.

Except, it’s not a “trade.”

The trade du jour lasts for a couple weeks or a few months – then it starts getting referred to as “a crowded trade” and then some new theme emerges and all the hot-money rotates into that.

Less than two weeks ago a finance guru I’m aware of (I won’t name him) sold 90% of his Bitcon and crypto positions (via IBIT and ETH) “due to bearish MACD crosses and support breaks”.

Bitcoin has since run to successive new ATHs.

As I’ve long said, Bitcoin isn’t a trade and trying to time it with chart patterns generally does not work. (Technical analysis in general never carried any real predictive edge for me, and when it comes to BTC specifically, I’ve seen too many failed “death crosses” to change my opinion).

It’s a monetary regime change – if market participants are trading anything it’s getting rid of a currency (“it’s the denominator, stupid”) for a store of value – and we’re seeing it in spades with Bitcoin and gold:

what do you call this pic.twitter.com/qiWgG0bcGk

— Mark E. Jeftovic (@MarkJeftovic) October 6, 2025

To be fair to that finance influencer, I don’t follow him enough to know if he maintains separate core Bitcoin stack in self-custody, and these moves are just referring to his trading activities, as distinct from long term holds. He apparently rotated into TSLA and silver. He’s also since followed up, acknowledging that Bitcoin ran to fresh highs, but he still expects a 40% to 50% decline in cryptos over the next year because of that MACD crossover. That said, he sold his TSLA and went back into Bitcoin (which has since dropped about $4K )

I don’t know if he’ll be proven right or wrong about a 50% drop – what I do know, and something I found out the hard way right when I was about to launch The Bitcoin Capitalist Letter, was that trying to pick the intermediate tops and bottoms when it came to Bitcoin was a fool’s errand.

You end up getting whipsawed. It sure looks like I’m watching it happen to this guy right now.

The advice I’ve been giving to my subscribers over the years, both for Bitcoin and the stocks we hold in our portfolio has always been:

Don’t try to time or trade the intermediate tops
Whenever Bitcoin (or one of our holdings drops) we ask ourselves:
- Is the underlying thesis intact?
- If yes: the only decision is whether to buy more or hold through
- If no: then you exit the position, at the moment your thesis is invalidated, regardless of the price.
Beyond that – exit when your own personal financial goals are met.

That’s it, basically the entire Bitcoin Capitalist playbook right here

What got me thinking about all this today was all these headlines we’ve been seeing lately about “The Debasement Trade”.

This has been so obvious to Bitcoiners (and before that, goldbugs), for so long, that I didn’t really “clue in” to the fact that our entire long-term thesis is finally in the process of being mainstreamed right now.

Mainstream establishment analyst wakes up to what we have been talking about for 5 years. In fact, some of us even wrote books about it! @elerianm (had to do a screen shot because he blocked me). Proof that the elites are late and are not even here yet. pic.twitter.com/oxxOKClRpi

— Lawrence Lepard, “fix the money, fix the world” (@LawrenceLepard) October 2, 2025

Gold and BTC hitting all-time highs together is sending a signal.

Bond yields going up even though central banks are cutting rates, is sending a signal.

Stonks are hitting levels that make the .com bubble look like a bombed-out value play.

Why?

Because these aren’t trades anymore.

It’s capital flight.

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Bitcoin is the Benchmark: Why the Biggest Opportunity in the Next Decade isn’t DeFi

Mark E. Jeftovic — Wed, 02 Jul 2025 00:11:15 +0000

***Excerpt from the July Issue of The Bitcoin Capitalist – ‘The Stablecoin Standard’

Here is the the argument for this section of the Bitcoin Capitalist entitled ‘Bitcoin and Crypto Macro’:

“This sums up everything we’ve been seeing over this past cycle – Bitcoin settling in as the base layer for the next generation of financial instruments, with stablecoins acting as the rails between the legacy dollar system and new fintech-enabled one.”

Here is the whole section.

—

I want to reiterate something I used as the opening quote to our Bitcoin Treasuries Playbook, by way of Willy Woo:

“The biggest fintech opportunity in the next decade is not DeFi.

It’s the merger of BTC + TradFi.”

This sums up everything we’ve been seeing over this past cycle – Bitcoin settling in as the base layer for the next generation of financial instruments, with stablecoins acting as the rails between the legacy dollar system and new fintech-enabled one.

Billionaire investor and VC Tim Draper remarked on Bitcoin’s continued dominance, making the argument that what we are witnessing is an example of a “winner-take-all” phenomenon:

Bitcoin recently hit 61% market share, up from 40% after the first boom-bust cycle and 50% after the last one.

There is a gravitational pull toward Bitcoin. All the successful innovations on other platforms are being now ported to Bitcoin.

This matters so much more than people realize.

All the innovation that started in altcoins (smart contracts, blockchain applications, ordinals) is moving to Bitcoin.

I liken this phenomenon to Microsoft in the operating system days.

When Lotus 1-2-3 took off, Microsoft created Excel and brought it into the OS. WordPerfect succeeded, so Microsoft built Word. Then Microsoft bought PowerPoint early. All of these applications became standard with Microsoft, while the early startups were marginalized.

Bitcoin is worth $1.8 trillion. The next largest token, Ethereum is only worth $250 billion. Bitcoin gets most of the programmers now. They are gravitating toward Bitcoin.

The five applications that really matter are being built on Bitcoin—DeFi (Peer to Peer Payments, Trading, Exchanges, financial inclusion etc), Smart Contracts (supply chain transparency and traceability, asset trading and resource tracking), Ordinals, Runes, and Layer 2 solutions like low cost micropayments.

This gravitational pull is accelerating.

Every entrepreneur building on Bitcoin has the entire ecosystem’s momentum behind them.

Smart entrepreneurs are always building on the platform with the strongest gravitational pull.

That platform is Bitcoin.

When people ask what Bitcoin will be worth in 5 years, I say it will be worth one bitcoin. It may be infinite against the dollar as the dollar continues to inflate into nothingness.

Bitcoin’s dominance was 61% when Draper posted that less than a week ago – it’s now 64%:

Meanwhile, Ethereum continues to languish, although there are those who say it’s undervalued and poised for a spectacular comeback – I just don’t see it.7

As noted in the Treasuries Playbook, we’re now starting to see ETH Treasury companies springing up; we mentioned SBET in that report – currently trading even lower than when we first cited it.

Now a Bitcoin miner of all things, BitMine Immersion Tech (NYSE: BMNR) has appointed Tom Lee (not the Motley Crüe drummer) as Chairman – and closed a $250M funding round to build an ETH treasury.

BitMine has the 62nd-largest corporate Bitcoin treasury at 161 BTC – and it’s unclear if they plan to liquidate that for more ETH purchases. I advise against it.

Bit Digital (BTBT) – also eschewing my advice – will be exiting Bitcoin mining entirely to “become an Ethereum pure-play”: they will sell off their Bitcoin (which according to their March investor deck was 742 BTC) in order to acquire ETH – and sell off or wind down their entire Bitcoin mining operation. We’ve never owned BTBT, good luck.

We did hold Sol Strategies, who set out to build a Solana Treasury company about a year ago, and we managed to ride that one near perfectly – exiting our position (for a stellar 2043% return) when I surmised that the memecoin trade was over, and there would be no alt-season as we’d seen in previous cycles.

Sol Strategies also had a BTC treasury – which I had hoped they would keep as an anchor – but they sold it off to buy more SOL, close to the highs – meanwhile Bitcoin has gone on to fresh new highs.

Future MBA and finance students may someday look back on this era and surmise that crypto treasury strategies can only succeed when the asset being stockpiled is the dominant asset, and it probably needs to be over some magical hurdle like 50% market dominance.

It also needs to have a rolling four and ten year CAGR that is higher than anything else, otherwise there’s no point in stockpiling it versus something with a higher RoR (see the “Bitcoin is the new Benchmark” section in the Playbook).

In other words, it has to be Bitcoin and all other treasury plays will stiff. Bank on it.

So, if Bitcoin is the only game in town for corporate treasuries and for the base layer of the next-gen financial system, “why isn’t BTC going up?”, is the question we’re seeing a lot of on social media…

Especially after that horrific crash all the way down to (checks notes), $98K on June 22nd – losing the psychologically important $100K level for nearly a whole eight hours.

People were permanently scarred – most likely from the Class of ’24.

One of the things I’ve been wrong about for this entire cycle was that we should be expecting a couple of 30% to 40% drawdowns, at least.

But there hasn’t been anything over 30% since November 2022, when the crypto winter ended, and Bitcoin bottomed at $16K (yes, really).

The chart below has the two major drawdowns of this cycle: the pull back after the spot ETFs approvals and post-halving hangover look like a single grind down – and that little squiggle in there in August was when the entire financial system shit itself after the Bank of Japan spoiled everything with a surprise rate hike that was a measly 15 basis points over expectations.

In this look at the very question of why “number not go up”, Bitcoin Magazine examined the HODL waves and concluded that there are just a lot of whales sitting on ultra cheap BTC who are taking their lifetstyle chips off the table, with over 240,000 BTC being sold by wallets that have been holding for one to five years in recent months.

“This selling has largely counterbalanced institutional accumulation. Given that daily miner issuance still adds another ~450 BTC to the market, we see why price has struggled to break higher: the market is in a state of supply-demand equilibrium”

Given the systemic shocks and seemingly existential crises that have been arriving at a steady clip (Japan imploding, bond yields, Middle East war, Ukraine War, etc), “Why isn’t Bitcoin Up?” isn’t the foremost question in my mind.

“Why isn’t it going down more during these periods?”, is what I’ve been wondering.

It is possible, even looking likely, that the market structure has fundamentally changed, possibly to the point where (dare I say it?) the four-year cycle could be a thing of the past.

Or maybe elongated, this other Bitcoin Mag piece looks at the 200-week Moving Average compared to prior cycles, noting that:

“a remarkably consistent pattern has emerged when the 200WMA surpasses its prior all-time high level. Across multiple cycles, when this crossover occurs,

Bitcoin has either peaked or come extremely close to peaking in price.”

Should that pattern hold up, we seem to be looking at somewhere around May or June 2026 for this cycle to top out (we would normally expect BTC to hit a cycle-top in Q4 this year or early ’26, if the four-year cycle holds up).

—

***Excerpt from the July Issue of The Bitcoin Capitalist – ‘The Stablecoin Standard’

—

My company easyDNS started accepting Bitcoin in 2013. We simply HODL’d the payments instead of converting to fiat.

That “treasury” is now worth 6X our retained earnings.

Sometimes the best strategy is the simplest.

Learn all the approaches.

Download The Bitcoin Treasury Playbook.

“If the thesis is correct…”: Not all Bitcoin Treasury Companies are Created Equal

Mark E. Jeftovic — Tue, 01 Jul 2025 23:25:24 +0000

***This is an excerpt from the June issue, a macro analysis of The Bitcoin Capitalist.

—

The emerging theme – perhaps timed by many participants to align with the big conference – is a veritable Cambrian explosion in Bitcoin treasury companies in the public markets.

Leading up to the conference we saw announcements from the Cantor Fitzgerald-backed, Jack Mallers-led Twenty-One Capital – ticker will be “XXI”, currently still “CEP” – we added that one as a supplemental.

There was also Bitcoin Magazine’s David F. Baily’s Nakamoto, which executed a reverse takeover of Kindly MD (Nasdaq: KDLY) and then went absolutely parabolic:

(We’ll wait and see if that one settles back).

Anthony Pompliano announced a SPAC of his own, currently PCAPU; he has yet to announce his merger target, but he’s raised $220 million (upsized from $200M) – this is one where I think we should pick up a few shares just on spec. As I’ve come to call him “Pump”, I think this one will probably move at some point and since it hasn’t blasted off yet, we could enter here.

Trump Media & Technology (Nasdaq: DJT) announced a $2.5 billion dollar capital raise to buy Bitcoin for their treasury – in this case the stock dumped on the announcement:

$2.5B worth of BTC on DJT’s balance sheet would put their market cap to BTC at under 2X at this level – but this is a pass for me.

Similarly, Gamestop (NYSE: GME) – the original memestock – had already announced a Bitcoin treasury strategy; and many were loading up on shares in anticipation of them actually following through and hitting the “smash buy” button .

At the Bitcoin conference, CEO Ryan Cohen announced a 4,710 BTC purchase (around a half billion dollars).

It underwhelmed expectations (GME is sitting on nearly $5 billion in cash), while Cohen’s address to the conference crowd was delivered via video and came across as uninspiring and tepid…

“If the thesis is correct, Bitcoin can be a hedge against global currency devaluation and systemic risk.”

It wasn’t exactly a “F*ck yeah!”-level dopamine hit.

GME shares also tanked – in this case in sharp contrast to the pump they enjoyed over the anticipatory run up:

Are “Bitcoin treasuries” the new “.COM” ? Or even before that… “Linux” (there was a period in the late 90’s after the VA Linux IPO, when penny stocks were simply changing their names to “Linux”-something and announcing a “new strategy” involving it, in order to garner truly moonshot (albeit short-lived) stock pumps.

Probably elements of both – some more opportunistic than visionary – and if I had to guess, I’d say DJT and GME are in the former camp.

I think the market sniffs this out and rewards the companies that have more of an ideological grounding in the space.

The Bitcoin maxis who did pile into GME bailed quickly.

I was just teasing the Bitcoin Therapist, but when it comes to this theme, what is the best way to play it?

I think MSTR is still the Big Kahuna here with an insurmountable head start – Metaplanet followed the strategy for the right reasons (Japan falling apart, fiat debasement), while Nakamoto and Twenty-One have the pedigrees. Pomp is Pomp, everything he touches turns to gold, so that will likely continue for now.

There is also a new pure play Bitcoin treasury company called Strive Asset Management and Asset Entities (Nasdaq:ASST) – the name I recognize there is Swan CIO Ben Werkman.

They’ve done a $750M private placement to acquire Bitcoin and look to be creating a vehicle into Bitcoin that can be accessed via 401Ks, ETFs (they operate a family of ETFs already) and direct indexing.

Then there are more under the radar plays like LQWD – which we added recently and has been on a good, sustainable run – now close to double from where we entered.

(I’ve lost track of who wanted info on the private placement so the details on that are included in this edition).

Jesse Myers, Head of Bitcoin Strategy for HK Asia Holdings Ltd., thinks that over 50% of all BTC will be held in corporate treasuries within 20 years:

This would not surprise me. As Bitcoin matures and grows into its role as a kind of financial bedrock, I’m expecting the vast majority of it to be held and financialized via collateralization.

As Lyn Alden likes to say “Nothing stops this train”, despite best efforts to derail it. By that I mean both Bitcoin as a base layer asset, and the emergence of crypto and fintech in general as a tectonic upgrade to the industrial-era monetary system.

The “Anti-Crypto Army” tried to derail the GENIUS stablecoin bill, citing possible ethics violations on the part of President Trump and his World Liberty Financial (WLF) stablecoin initiative.

In the end, the Senate voted 66-22 to advance the bill despite the aforementioned objections.

Trump seems to be inviting opposition: the Trump and Melania token launches, the WLF alt-coin pumps – I can see down the road should the Dems ever take back either chamber or even get the chance to reset the regulatory table, they’re probably going to have Trump & family in hearings and investigations for decades around all these maneuvers while in office.

—

My company easyDNS started accepting Bitcoin in 2013. We simply HODL’d the payments instead of converting to fiat.

That “treasury” is now worth 6X our retained earnings.

Sometimes the best strategy is the simplest.

Learn all the approaches.

Download The Bitcoin Treasury Playbook.

Is LTCM Replaying Itself Out in US T-bills?

Kane McGukin — Wed, 12 Jun 2024 19:04:27 +0000

By Kane KcGukin via The Mesh Point

When it came to finance, they were the smartest guys in the room. Two Nobel laureates, one-half of the “Black Scholes” options pricing equation, and leverage.

When the carnage of LTCM stopped it was understood that it was not a case of genius men wielding math models but rather an abuse of leverage. They were levered 30-1.

LTCM made big bets on pricing discrepancies. Arbitraging stocks, bonds, currencies, and derivatives with the expectation that prices would eventually converge.

Until… They were wrong.

When the unexpected happens markets suddenly find the smartest guys in the room are mere mortals, not God’s. Declining market opportunities expose that these capitalists have no special powers. Only special agreements allow them to ignore conventional risk-taking rules.

Their addiction to risky bets is the driver behind extreme levels of leverage.

With the collapse of LTCM, it looked like a single hedge fund was going down the tubes and about to pull the entire global financial system along with it.

Is the Same Scenario Playing Out Today?

Are we seeing the same infatuations with leverage and discrepancies in a much more important space – the US Treasury market?

Is leverage and arbitrage the reason why the yield curve has remained inverted for one of the longest periods in history?

Or, is it possibly why we’ve avoided a recession for several years while almost every traditional signal has pointed to one?

Even the FEDs on data is being ignored.

Don’t get me wrong, this is not a recession post. It’s a post about the amount of leverage building up in a crowded but “safe” trade.

The problem with over-abuse of the leverage in the UST “basis trade” has been clear for years. However, it wasn’t until around 2015-2018 that we began to see it break with some level of frequency. The appearance of the trade working has more to do with growing FED programs like QE, QT, and BTFP, more so than the genius of prodigy traders.

At this point, credit facilities and backstops are more than expected. They are required. But, what if something “suddenly” changes? …

I have no level of “expertise” here though it is a clear and visible problem based on an abnormally large number of wild swings in Fixed Income markets over the past couple of years.

Reading a passage from Fortune’s Formula hints at the real issue. We are seeing an infatuation with taking on irrational risk. Assuming it’s risk-free and ignoring the immense amount of leverage required to make it all work.

Should we be okay with the pervasiveness of the “basis trade” because it is under watch by the “smartest guys in the room”?

Guys who appear smart but add a lot of complexity, arbitrage, and leverage to make minuscule profits look enticing. They are the ones working to keep things “stable”.

Is this “basis trade” or “arb” not the same as the ones we’ve seen blow up time and again? Is it back in the Treasury market?

Trades like this can go on for a while. It sounds good, and then the music stops. Once an “unexpected” event causes an entity to close a trade too early or causes a fail to deliver. That’s when a tidal wave of dominos ripples through the financial system and economy. Just ask Silicon Valley Bank.

Leverage + Excessive Treasury Issuance = Manipulated profits.

Pulling back the wool, makes it look like a pool of pricing discrepancies has likely allowed the yield curve to stay inverted for an abnormally long period.

Is There a Repeat of the LTCM Trade but This Time in US Treasuries?

Two of the largest players in the market – Citadel and Jane Street facilitate much of the discrepancies in hedge fund trades across the curve. Together they control an abnormally large portion of many of our markets as noted in Credit Bubble Bulletin.

How does the UST “basis trade” look like LTCM?

Currently, the FED is issuing a massive amount of short-dated paper. The market shorts it, buys the long end, for an extremely small gain. A gain that only appears profitable because of an irrational amount of leverage. All to make a “normal” annualized profit. Leverage that has been speculated to be in the 300%+ range!!

When The Unexpected Leads to Too Big to Fail

In reality, when something “unexpected” happens, these levered trades create pockets of destabilization, or systemic risk in our theorized “safest asset”.

“Moral hazard is today a greater issue than ever. The likes of Citadel and Jane Street have become too big to fail – and they operate as such. And to see them (and their use of leverage) expand so aggressively corroborates the “Terminal Phase” excess and speculative “melt-up” theses.” ~ Credit Bubble Bulletin, May 10th, 2024

One can only connect the dots for the growth of this trade. As people have been replaced by computers and “reduction in force” the players doing this basis trade have moved beyond just hedge funds and shadow banks. So, many small funds with billions of dollars seem to be placing the same low return, levered trade in the “safest security”.

Why? To offer bigger returns. But do they all understand the game they are playing?

Are they just another set of geniuses in the room supported by highly competitive and profit-first entities that will provide a line of credit to settle the trade without regard for where the underlying security lies?

Much like the GameStop saga… where “professionals” play a gamma squeeze game with little understanding of the signal provided by the Greeks underneath. Trades can get out of hand quickly. Causing entities to fold or requiring outside capital infusions. Creating a scenario where the rules must be changed to stop bleeding across the system of preferred players.

Many of these smaller funds and banks (SIVB types) don’t have the expertise, but are just copycatting a “trade that works.”… until… it doesn’t. Until the “unexpected”.

As we all know, every crowded trade stops working at the most critical juncture. When the last buyer buys, or the last seller sells. Just ask Sam Bankman-Fried (Jane Street Alum) and FTX.

Is the general fund market now shorting the short-end with (extreme) leverage? Is this pushing short-term yields much higher as the Treasury tries to combat by issuing more in the 2-5yr space where the buying is lower due to our geopolitical and financial backdrop?

Have we created an inversion that can’t un-invert because a large swath of the market is drunk off < 30bips that’s levered several hundred percent?

Will new FICC trading rules cause these trades to come apart at the seams?

Is the “unexpected”, a change in clearing rules that will centralize FICC trading which comes into play at the end of 2025 and into 2026?

Will rules that centralize clearing force many levered trades to be unwound?

Will it expose weak hands as players are forced to shift to meet new regulations?

Are we watching another case of the “sophisticated crowd” causing an irrational market bubble?

So far, all major bubbles have been created by the “smartest guys in the room”, not the dumbest. Not “Joe Six Pack”.

Those smart guys are the ones who repeatedly ignore the known risk to appease their internal desire for gambling and have historically been the ones causing problems for the entire global financial system.

In 2018/19, we saw the same issue causing Repo spikes and failures.

We saw the ramifications this past July/Oct when Bill Ackman was publicly, and in my opinion openly “talking his book” to enter and create exit liquidity for his trade.

In crypto, this is called a “rug pull” or “exit scam”.

Additionally, the August timeframe has become known as the period in which roughly all the players in this trade make adjustments. (see Jeff Snider’s work). Per Jeff, in this timeframe and in the Eurodollar curve, you see abnormal market moves in a historically low-volatility security.

These points and those below paint the picture of how big and out of hand the UST basis trade might be.

Are these moves just more deckchair shuffling among struggling players?

A couple of quick searches:

Amounts of leverage typically used in this market:

Get on the Bombthrower mailing list here and receive a free copy of The Crypto Capitalist Manifesto and The CBDC Survival Guide when it drops. Subscribe to Kane McGukin’s Substack here.

The Bitcoin Effect: Onwards and Upwards Post-Halving

Mark E. Jeftovic — Sat, 01 Jun 2024 23:38:18 +0000

This is an excerpt from the latest edition of ‘The Bitcoin Capitalist’: The Bitcoin Effect. Go here to find out what a premium subscription can do for you.

—

We’re a little over one month since the fourth halving, with the price more or less chopping sideways and the action and sentiment being rather subdued – despite the fact that in terms of immediate post-halving periods, we’re completely in line with prior cycles.

As Ecoinometrics observes,

“Bitcoin is doing ok. No crazy drop. No crazy jump. That’s not surprising. Just in term of patterns, the real growth doesn’t start typically until six months in.

If the macro permits and BTC follows a trajectory within the historical range, one Bitcoin will be worth six figures in 2024. Let’s see how that plays out.”

When comparing prior post-halving moves to where we are now, we’re still on track for a typical year 12-24 month run up.

How high?

It’s always pointless to even guess when it comes to Bitcoin: I’ve been saying a six-digit price is more or less baked in at this point; do we get to seven on this cycle? It’s really hard to say.

Ecoinometrics puts it anywhere between $140,000 USD to $4,500,000 USD – that’s such a wide band as to appear useless at first glance, but what I think both he, and I are saying, is that we’re in all likelihood going to hit six digits (and probably get a good 20% to 30% dump the moment we do), and then it’s within the realm of possibility that we hit seven by cycle end, which I am going to be looking for in Q3 – Q4 2025.

The drivers this cycle are institutions and non-retail players coming in to a market where there is less and less BTC to be had:

For starters, the halving has reduced the new issuance of Bitcoin from 900 new BTC daily to 450. On top of that, the percentage of already existing Bitcoin that has been held in wallets for over three years has been steadily increasing for more than three years.

In fact, if you look at the HODL wave chart (posted by HIVE), you’ll notice that the number of long term-holds is going up across all long-term time frames:

3 – 5 years
5 – 7 years
7 to 10 years
Even the over-ten-year HODLers are HODLing tight.

The last crypto winter took place over a rare contraction in M2 money supply and a massive drop in M2 growth rate. Bitcoin then bottomed and turned higher – with M2 still coming down.

That was auspicious, because typically, it’s the whole “money printer go brrrrr” narrative that many people think drives the space. With Bitcoin even putting in a couple of fresh all-time highs ahead of the fourth halving, it seems as though we’re coiled for an explosive move higher once things finally kick into gear.

And now, M2 growth rate has reversed and is headed back up – with Goldman’s Mark Wilson wondering if we’re at a “monetary juncture akin to 1995 or 2011.”

via Zerohedge

What seemingly drives asset prices higher than outright monetary inflation is liquidity:

And it appears as though all the conditions are in place for liquidity to turn upwards again:

Via RealVision Global Macro

The debt cycle, the election cycle and all manner of systemic pressures on the financial system are aligning to provide an added boost for this cycle (and it may be the mother of all boosts).

The first order consequence of the liquidity cycle (or perhaps more accurately, the driver of it) are central bank balance sheets, which just keep expanding and as far as I can tell, well never meaningfully revert to pre-pandemic levels, let alone where they were before the GFC.

Raoul Pal frequently alleges that during the GFC, the central banks of the world made a deal to absorb all the bad debt onto their own balance sheets, and from that point on, CB balance sheets will just continue to soak up any speed wobbles in the global economy.

That’s why PE multiples for equities remain at nosebleed levels – and why things like value investing no longer works.

Zoltan Pozsar came to the same conclusion, albeit from a different angle, saying value investing is dead “because bonds offer no value”.

He says that until bond investors impose discipline onto the bond markets (demanding some manner of “margin of safety”) – then as long as central banks backstop the debt markets (see balance sheet talk, above), asset prices will continue to rise. No discounts, no mispricings relative to value, no margin of safety – just all risk premium, all the time, as discipline gets thrown overboard.

(Yes, I frequently describe myself as having come up a value investor, but I finally began to realize that “the system” will never again allow the financial markets to come unglued to the point where deep value exists. It happens, but it’s rare – and also notable is that the one place we seem to find it, from time to time, is in crypto, when we uncover equities trading below the mark-to-market value of their digital assets).

—

This is an excerpt from the latest edition of ‘The Bitcoin Capitalist’: The Bitcoin Effect. Go here to find out what a premium subscription can do for you.

How Private Equity “Adds Value” In A Fiat-Financed World

Mark E. Jeftovic — Mon, 20 May 2024 18:26:01 +0000

This past weekend I was at the Canadian Bitcoin Conference in Montreal, where I moderated a panel on Bitcoin As A Treasury Asset For Corporations. At the time I disclosed that 100% of easyDNS‘ retained earnings are in Bitcoin – and that the mark-to-market value of that Bitcoin is currently 300% of the retained earnings balance from our latest year-end financials (hold that thought: the main takeaway being – I have this business, going on over 25 years now, and there’s a stack of sats, cash, or any liquid asset, that the business has built up and continues to grow in retained earnings).

Also in Montreal, there resides a private equity firm that has been bugging me to sell them the business for a long time. Years.

Since the relationship has been cordial, I decided to take an in-person meeting while I was there and the main guy came out to Le Mount Stephen, where I was staying, and we had lunch. What became clear as we talked was that he had no interest in how easyDNS is actually positioned or differentiated, let alone what our growth trajectory or levers were.

All he really wanted to know was top line and EBITDA. “We don’t grow our companies organically”, he told me, “we just acquire them. As many as we can”.

The plan, as it turns out, is to hoover up as many small businesses in the ISP, MSP, SaaS space as possible, and in a few years they’re going to mash them all together and take it public. That’s the entire “investment thesis”, or what passes for one.

It wasn’t even really a roll-up, from the sounds of it. There was no platform business into which the rest would be shoe-horned. It was just going to be a mud-ball.

He asked point-blank if I would be interested in being acquired – and I told him, like I always tell him – if the multiple is high enough and terms don’t suck, sure. Otherwise, no.

That’s when he explained his problem to me:

“When interest rates were zero, we could pay 5X or 7X EBITDA for businesses like yours. But now, with interest rates higher, we can only offer 3X or 4X EBITDA.”

In my business, believe it or not, private companies typically get acquired for a multiple of revenues or else a P/E north of double-digits. I was also having a hard time understanding why his cost of capital had somehow become my problem.

After explaining how the valuations worked, I pointed out that of the publicly traded businesses in our space, one was trading at a P/E of 13 – and the other two were losing money.

“Oh, but public companies are a completely different animal”, he lectured. I had also done the quick maths in my head by now and figured what he was offering to do was buy my company for about half of what we had in retained earnings on the balance sheet.

“So in other words”, I asked him, just to confirm I understood this correctly:

“You want me to sell you my profitable and growing business for less than a fraction of cash and at a shitty low multiple?”

“Exactly right” – he didn’t actually say that – but he confirmed it, but with the qualifier:

“We let you keep the cash”

I pointed out to him that if I just keep the business the cash is mine anyway.

It really was unfathomable why anybody would take this kind of a deal, but I did clue-in to what the entire value prop of the private equity fund was:

Borrow money and use it to acquire private businesses at 3X – 4X EBITDA
Flip the agglomerated holdco public at 10X to 15X EBITDA

That’s it.

No overarching blue ocean strategy, no thought toward compounding, no “organic growth” – no differentiation.

It was just an arb play, using borrowed, made-up money to sweep a bunch of privately held small businesses into a public entity and capture the spread.

This was not an isolated incident.

While easyDNS has had acquisition overtures from the very beginning – the tempo definitely increased during COVID and has remained elevated. And we’re a pretty small company – tiny, compared to where you would think private equity typically plays.

While I was usually demurring before we got to talking about multiples, the overtures have been cutting to the chase earlier in the communications process, and it’s coming in around 3X to 5X EBITDA – to buy a business with SDE being a healthy double-digit percentage of the top line and with more cash on the balance sheet than the total acquisition price.

It’s insane but given that we’re in the shadow of a craze where even SPACs were being valued in the billions before they even had a business focus – it’s unsurprising.

To be clear – I’m not planning on selling the biz. My flight back from Montreal was delayed so I was whiling away the time shitposting about private equity on twitter and some clients were expressing concern that I was looking to exit. I am not.

How #PrivateEquity adds value in a fiat-financed world… pic.twitter.com/DP5Uayvdm0

— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) May 20, 2024

As a Bitcoiner, I have extreme low-time preference – I wrote about this in the inaugural Bombthrower post, and recently revisited it in a twitter thread:

The very first Bombthrower post was called “The Transition Overview: Building Companies That Matter”. Since the last two #Bitcoin cycles have proven it to be on point – I’ll summarize it here in a thread https://t.co/vQlaULfiMQ

— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) February 21, 2024

“No Exit Investing” – Totally Alien Concept to PE, VC and Fiat Finance…

As the fiat monetary system’s debasement has accelerated, I viscerally understood that the business is the asset – not the currency these swindlers are trying to get you to trade it for. I wrote about this years ago, even before M2 blew out about 30T over the pandemic, and I talked about the business as a “no exit” investment:

It is hard to build a successful company. By this I mean a company that is self-sustaining, maybe an off year here and there but for the most part healthy and profitable.

It’s also hard to build a brand. So at the prospect of selling off a successful company and an established brand for a pile of money, the big question I can never answer is Then What?

Thanks to worldwide government interventionism and central bank incompetence, all asset classes are malignantly distorted beyond recognition. What the hell is one supposed to do with the proverbial briefcase full-o-cash? You’ll hand 25% to 40% of it over to the government (even more, come June 25th here in Canada), and what’s left then carries a near negative yield because that same government has a “targeted inflation” policy.

Start all over again? With your negative yielding cash and a non-compete barring you from the one business you know best and your customer base and brand gone? The only asset I can possibly think of that produces the kind return on equity that easyDNS has for me, is easyDNS itself, so why sell it?

The private equity playbook is having a hard time being run at these higher interest rates, so holdco builders and funds are out scouring the terrain for healthy, profitable, small, privately held businesses to buy at lower valuations so that they can mash them together and flip them onto lumpenvestors at higher multiples.

It’s easy to understand why, once you realize that because fiat money is disintegrating, in order to keep expanding a financial system built on debt, you have to financialize all the things.

When the pandemic hit I had no idea how my small business was going to navigate it. So I laid out a Business Survival Blueprint in a huge mindmap and it helped me break things out into areas of focus and decision trees. Sign up to the mailing list and I’ll send you the PDF – you’ll also get The CBDC Survival Guide when it drops later this year.

Follow me on Twitter, or Nostr.

What is Money? Podcast Interview: Cracking the Code of Finance

Mark E. Jeftovic — Mon, 25 Mar 2024 03:08:20 +0000

Robert Breedlove and I discuss the path to mastering finance, through exploring topics ranging from Bitcoin, peak oil, and the global debt supercycle.

Summary: Artificially suppressed interest rates have led to a global debt super cycle, and the concept of equality of outcome is nonsensical.

Key insights

Economic and Financial System Observations

The debt super cycle is characterized by artificially suppressed interest rates, leading to a constant decrease in the cost of capital.
The central bankers needed something like covid to hit because the system was coming unglued under the hood in late 2019.
The artificially suppressed interest rate creates distortions in the marketplace, leading to a global debt super cycle.
The concept of deflation is actually beneficial for the economy, leading to more wealth creation and productivity.
“Equality of outcome obviously BS. We’re all born different.”
“Equality of outcome is a nonsensical concept.”

Cryptocurrency and Blockchain Insights

The centralization aspect of eGold led to its downfall, while Bitcoin’s decentralized nature impressed me as 100% market force in action.
Bitcoin is the TCP/IP of non-state anti-fiat money, while other cryptocurrencies are more like startup applications rather than decentralized money.
Bitcoin’s current penetration is probably less than 2% of Bitcoin’s total addressable market, making the risk reward disproportionately in favor of Bitcoin.
The idea of inscribing a name server delegation onto an ordinal and putting it on the blockchain to create uncensorable domain names is intriguing and potentially revolutionary.

The Transition Overview article discussed throughout the interview is here, and the updated tweet thread is here:

The very first Bombthrower post was called “The Transition Overview: Building Companies That Matter”. Since the last two #Bitcoin cycles have proven it to be on point – I’ll summarize it here in a thread https://t.co/vQlaULfiMQ

— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) February 21, 2024

The Insanity In Our World Is Driven By Money Printing

Marty Bent — Sat, 23 Mar 2024 18:43:03 +0000

Fix The Money, Fix The World

Via Marty’s Bent

This chart has been making the rounds on Twitter this week and I think it’s a good image to send you freaks into the weekend with. It’s easy to get swept up in the chaos of the day-to-day volatility that exists in our world. Recently, our minds have been inundated with headlines about illegal immigration, squatters and the degradation of private property rights, war across the world, small battles within the larger “culture war”, increasing prices, and the decisions made by central banks around the world. In the midst of all of this chaos it is important to take a step back and remind yourself of what lies at the core of most of these issues; the fact that we’ve completely broken money.

When you break money, the most important tool humans use to facilitate economic activity, a ripple effect of negative consequences begins to emanate from the root of the world’s engine. Those ripples create the momentum that leads to chaos that we are witnessing today.

Broken money leads people to store their value in sub optimal vehicles like housing. This drives the cost of real estate up unnaturally and increases the gap between the “haves” and the “have nots”. Sowing seeds of animosity. Seeds that, when left to germinate and grow via the further degradation of the money people use, blossom into ugly flowers of Anarcho Tyranny.

This has manifested in the trend of people claiming other’s houses by squatting in them when they are left unattended for an extended period of time. The preferential treatment that has been given to squatters over homeowners in recent years can be seen as the regime which controls the money printers throwing the plebs a bone as they struggle to get by, an attempt to push the productive class to violence against a state unwilling to respect private property rights, or a combination of the two.

Broken money incentivizes governments to allow their borders to be bum rushed by cheap laborers who will take low paying jobs that enable the systemically fragile economy to keep chugging along while simultaneously increasing the chaos that already exists and diluting the values that the natives of this country believe in.

The excess and decadence enabled by a world run on broken easy money allows people to live in a detached reality that leads them to push objectively false narratives. This is why there are running debates about gender and a retreat from merit based compensation.

All of this stems from broken money.

The chart above should act as a reminder to you all that the biggest problem in the world right now is the money. The chart above should also prove to you that the most powerful people throughout the economy are going to fight tooth and nail to protect the broken money because they benefit massively from the fact that it is broken.

Keep this in mind as the chaos increases and narratives begin to form around using bitcoin as money.

Get on the Bombthrower mailing list here and receive a free copy of The Crypto Capitalist Manifesto, which outlined all this. However, by the time you read this it may already be too late to sign up for The Bitcoin Capitalist Letter: new subscriptions will be closed once Bitcoin hits a new all-time high.
Follow Marty’s Bent via TFTC.io