In my previous post I talked about how we may see a return of the risk parity portfolio this year as tech stocks, bonds, and gold all go up at the same time. As I’ve observed the market unfold this week, I realized that I’m too early on that call, as the looming impact of the post debt-ceiling Treasury issuance is already having an outsized effect on yields, USD, and equities. I recommend reading this
The increasing possibility of some sort of default will push folks deeper into gold and gold-like assets. Since BTC is gold-ish for those under 40, it would see more adoption in the even of any kind of delay.
You’re probably going counter my argument by pointing out BTC offers no yield and US Treasuries do. In fact, with sticky inflation rates may go even higher. However, in the even of any kind of default, all of the yield calculus goes out the window as the US government’s IOUs are no longer risk free.
Is any of this sounding reasonable? Or do you think I have absolutely no clue about macro trading?
So far most asset classes outside of CDS and June tbills have been sanguine about the risk the debt ceiling doesn’t get resolved. It’s definitely a non zero risk but my base case is that it comes close and then gets resolved. If the US gov defaults, there will be a violent risk off event and I don’t think btc is guaranteed to go up in this scenario.
Hi Geo... good stuff as usual, but BTC is going to climb before the liquidity scenario you envisioned. Are you going in too early?
What will be the driver for BTC to climb before the big liquidity withdrawal?
The increasing possibility of some sort of default will push folks deeper into gold and gold-like assets. Since BTC is gold-ish for those under 40, it would see more adoption in the even of any kind of delay.
You’re probably going counter my argument by pointing out BTC offers no yield and US Treasuries do. In fact, with sticky inflation rates may go even higher. However, in the even of any kind of default, all of the yield calculus goes out the window as the US government’s IOUs are no longer risk free.
Is any of this sounding reasonable? Or do you think I have absolutely no clue about macro trading?
So far most asset classes outside of CDS and June tbills have been sanguine about the risk the debt ceiling doesn’t get resolved. It’s definitely a non zero risk but my base case is that it comes close and then gets resolved. If the US gov defaults, there will be a violent risk off event and I don’t think btc is guaranteed to go up in this scenario.
Agreed about violent risk off... Even though the Japanese government holds a lot of US Government bonds, I’m very long on the Japanese Yen.