Is Bitcoin Disconnecting from the Economy? – Bitcoin Magazine
Below is a direct excerpt from Marty’s Bent Edition #1271: “Sliding rates, begging and bitcoin’s relative strength.“ Sign up for the newsletter here.
Last week we discussed the fact that credit default swap spreads for sovereign nations are becoming completely detached from their historical averages. In that piece, we highlighted that rapidly rising interest rates will begin to have a significant effect on interest payments on national debt. Our friend Lawrence Lepard did some rough calculations on the exact impact this type of high interest rate environment will have on how much money the US government will owe its counterparties in interest payments if interest rates continue to rise. At this rate, interest payments will be about 3.5 times what they were in 2020. Of course, this will not happen immediately, as many of these Treasuries will have to mature. But if you take a look at the maturity calendar, a significant amount of these Treasuries will mature over the next two years.
via Lawrence Lepard
Although interest payments on the US national debt may not increase to $1.2 trillion immediately, they will begin to increase substantially in a fairly short period of time. This comes as tax revenues will almost certainly drop dramatically as Americans try to deal with an inflation rate that screams far beyond what is reported via the consumer price index; and as capital gains tax revenues dry up as most will likely have to report losses on stock portfolios and home sales. Anyone with even a shred of common sense and rudimentary math skills can see that this problem is about to have a significant effect on people’s confidence in the US government’s ability to pay its debt—and by extension, overall confidence in America’s ability to be the “leader” of the Western world. It doesn’t matter how much DXY rally.
Not only that, but anyone who has become completely addicted to the easy gravy train that left the station in 2008-2009 is literally begging for the Federal Reserve to reverse course on its hawkish policy. In the last three weeks alone, we have seen the UN, the International Monetary Fund (IMF) and ARK Investments Cathie Wood come out and directly and indirectly ask the Fed to reverse course.
(Source)
via ARK Invest
via ARK Invest
We are in very strange times. Everyone from the UN to the IMF to major asset managers are coming out and admitting that their way of being is entirely dependent on the gravy train barreling down the tracks at full speed. They have built their worldview around a reliance on central planning and free money flows that drive up the prices of the assets they own and lull the world into a false sense of security. The markets have been forced to quit their heroin addiction cold turkey, and the withdrawal shocks are more violent than anyone could ever imagine they would be. The world is wandering into unknown territory. While the heroin addicts are begging their dealer to give them the fix, bitcoin is quietly showing relative strength in the background.
via NYDIG
As those in the mainstream continue to heave $18,000-$20,000 bitcoin after a roughly 75% drop from highs reached late last year, it appears that the nascent peer-to-peer digital cash system is developing a stable base as all around it begins to crumble at an increasing pace. This is something to keep an eye on in the weeks and months to come. Who knows if this relative stability will continue in the future? If it does, while everything else continues to crash, it would be a massive signal that there are likely more and more individuals out there who recognize the value proposition that bitcoin provides as a money-friendly shield from the whims of the central planners who have set the world on fire in fire.
Could the disconnect be upon us? We’ll see.
