It seems that AI and technology stocks have sucked all the oxygen out of nearly everything, and even they now look a little out over their skis.

What didn’t help anything was incoming Fed chair Kevin Warsh taking an unexpectedly hawkish tone around interest rates and the FOMC committee signalling anywhere from one to three rate hikes for 2026.

I find it amazing how this collection of “dots”, each one corresponding to some egghead technocrat, can cause such mayhem in global markets… be that as it may, the committee is now indicating higher for longer rates, and while there are those who think they’re bluffing, I’m not inclined to fight the Fed on this.

The Big Print is still coming, but for now, at least into the US mid-terms, they need to do some look-busy work around inflation. They don’t have a lot of wiggle room on this, but it will affect matters in the near term - I’ve rebalanced my own portfolio in this light, which I lay out in detail below.

As I write this (on June 25th - from the last Sovereign Capitalist Letter), Bitcoin is slightly below the $60K handle and has violated some key baselines that have held through every bear cycle since its inception:

The Bitbo Power Line Support:

Based on the Bitcoin Power Law popularized by Giovanni Santostasi, Bitcoin’s price (and related metrics like network adoption, addresses, and hash rate) scales according to a simple equation of the form:

Price ≈ A × (time since Genesis Block)^n

Where:

• Time is measured in days since January 3, 2009 (Bitcoin’s genesis).

• n (the exponent) is around 5.6–5.8 (often ~5.7–6 depending on the fit).

• A is a scaling constant.

It’s basically a more refined model of our “secret cheat code” of just flipping the price axis into logarithmic mode and suddenly the pullbacks don’t look so vicious anymore. In the power law model, both axes are in log mode.

When you map the BTC price onto such a log-log plot1, it appears as a remarkably straight line - a hallmark of power-law behaviour seen in many natural and social systems (e.g., city growth, earthquakes, metabolic scaling in biology).

Over previous cycles, the BitBo rendition of this provided a remarkably reliable bottom indicator: in the 2022 crypto winter, Bitcoin bottomed $5 away from the lower trend line.

On June 25th, it dropped below it and remained there now at publication time (it’s since rallied back above it, for now).

The other thing that leaps out at me from the lifetime chart (starting from 2011), is that the bull market never made it to the resistance line over the past two cycles.

There could be a few reasons for this: the distortions introduced by all the grift in the 2021 cycle, then the ETFs changing the market structure in 2024 could account for it.

It could also be that as the asset gets older, the volatility compresses (although it may not feel like it) and as the cycles stretch out, the amplitude narrows.

Then there’s the 200W moving average, though less exact, which has also given reasonable guidance on where to look for bear market bottoms in the past.

We’re dipping below that now:

We saw similar pattern interrupts in the previous bull cycle, where Bitcoin put in successive all-time highs before the halving (which had never happened before) - and then ended the cycle with a down year in year 3 - also unprecedented.

If we finish 2026 as a down year, that will be another unprecedented data point: two successive down years.

As I write, sentiment is even worse now than we’ve been reporting over previous months (although the “Fear And Greed Index” is only at 13; it printed a couple of 8s in March when BTC was about $20K higher).

ETF outflows also look about as bad as they can get:

The disenfranchisement with Strategy is palpable and the disdain for other Bitcoin treasury companies (like NAKA) is akin to full blown contempt.

Is it over?

Not for Bitcoin - I think the ship has sailed on the possibility of Bitcoin failing. There are, in the words of Checkmatey_, a permanent base of “natural buyers” for Bitcoin: at some low price, opportunistic greed will take over from loss-averse fear (if only because there will be nobody left to sell).

I keep my eye on the hash rate, which is still in an overall uptrend:

It may be easy to overemphasize this bear market reduction in hash rate from looking at the chart, but in percentage terms, the China mining ban in mid-2021 knocked a good 40% off the network practically overnight, and it took a few months to recover.

From the 4chan-top of the Oct 6th ATH to the nadir of the January dive is only about 22% by comparison, and it snapped back almost instantly, and has continued to do so on every spike low over this year.

Miner capitulation metrics for all intents and purposes are also signalling a “bottom”, as less efficient miners shut down their rigs (which brings down the hashrate), and sell BTC reserves to cover costs:

Finally, at least as it concerns Bitcoin, we are now sitting at over 50% of the total coins being below their acquisition cost, meaning more short-term holders are underwater than profitable:

This is one of the most consistent bottom indicators, as this next chart shows:

In other words, all indications are that we are putting in a bottom for Bitcoin.

There is a lot of psychological capitulation, as well as outright derision and hostility towards some personalities - like David Bailey (Nakamato CEO) and Michael Saylor (we’ll cover Strategy below).

But there were a couple of notable capitulations in the wider crypto space in the last month:

Bankless co-host David Hoffman has exited Ethereum.

Huge signal here, the Bankless boys were the evangelists for the space from the very beginning of their show. Hoffman disclosed his divestment in an X article:

While he says he still believes in the Ethereum ecosystem as a whole, he doesn’t see any fundamental drivers of asset appreciation for ETH itself, to wit:

• The “ETH is Money” thesis played out—but fell short of its fullest potential. It didn’t fail outright; Ethereum achieved substantial success as a technology and ecosystem, and ETH reached a market cap that fairly reflects what the network delivered. However, it didn’t become the dominant global money or capture as much monetary premium as hoped.

• No expected structural rerating for ETH. He views the current price as fair (”Ethereum got the ETH price it deserves”) and sees little catalyst for the asset to be significantly repriced higher (or lower) by the market. The window for major upside revaluation appears to be closing.

• Better capital allocation opportunities elsewhere. This was not a bearish call on Ethereum itself. Hoffman rotated proceeds into other assets he sees as undervalued with more upside (e.g., VVV, NEAR, ZEC, HYPE, LIT). He wants to deploy capital where he perceives higher potential returns.

And finally, from the “remember where you read it first” file:

• Ethereum is a “giver, not a taker.” The network excels at delivering value to Layer-2 solutions, applications, users, and builders—but much of that success accrues to them rather than accruing strongly back to the base-layer ETH token (e.g., operating more like a public utility or non-profit at cost). L2s and apps capture a lot of the value.

That last point is basically what I’ve said here years ago, pre-Proof-of-Stake, even - that Ethereum basically incentivizes its own cannibalization.

Moving right along…

Cardano founder Charles Hoskinson: “It’s Over”

Hoskinson put out a “Wave of Failures” video in early June. This followed setbacks like the shutdown of major Cardano projects, such as analytics platform TapTools winding down after 4 years, NFT marketplace JPG.Store closing (never heard of it, tbh), and others, all facing similar issues.

Cardano’s TVL had dropped sharply (now at $84M from an ATH of $693M in Dec 2024), and the community voted against funding the flagship 2026 Summit, forcing its cancellation. ADA hit multi-year lows below $0.20.

He conceded that he can’t unilaterally “fix” anything as he had burned his genesis keys, possesses no governance keys, and he can’t force hard forks or changes.

So Hoskinson announced he’s stepping back from the project (“taking a break”, whatever)

Cardano is down to $0.14, which puts it at a market cap (incredibly) of $5 billion still. It’s not often that I’ve tried to short a crypto but, maybe this one still has more room to fall.

So, after all that, if you’re asking me “is it over?” Let me put it this way:

As you’ll see below, I have moved to a somewhat more defensive positioning - with possibly my highest cash allocation in memory.

Doing so was less about AI bubbles and Bitcoin weakness than cashing out some decades-old positions at extreme profitability, which I used to replenish the war chest ahead of a possible buying spree.

Among the positions I did sell, however, was my final ETH ETF stake, and in a long-overdue move, we’re exiting Ethereum entirely and removing that largely ceremonial 1.5% allocation to the ETFs from the portfolio.

But I did go out and pick up more Bitcoin at sub-$60K prices.

I’ve released an entire operating system around my new book: The Blueprint - Survive and Thrive in an Overclocked Timeline. Members of The Sovereign Capitalist get access to the pre-publication version and all future iterations. Like the platform o/s - this is constantly evolving and retooling.

My Substack readers can check it out for month free with you use coupon code: SUBSTACK

Check out https://thesovereigncapitalist.io

As everyone knows, the SpaceX IPO took place on June 12th, purportedly making Elon Musk the world’s first trillionaire - I caveat that because nobody else is qualifying that this is only when measured nominally in USD terms.

Yes, Musk is extraordinarily successful and has managed to realize dynastic wealth alongside that success.

However Musk is not the world’s first trillionaire - there have been many before and interestingly enough, nobody knows their names.

I used to be a trillionaire myself, when measured in Zimbabwean dollars…

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Two inexorable realities have come into sharpened focus over the last month or so. Both are themes we have been exploring and monitoring - one, since practically the very beginning of this service, the other, over the last year or so.

The first is the unsustainable nature of the global monetary system: we are not unique in calling that out - it’s practically a trope and has been for a long time.

The other is the existential necessity to win the new arms race - which is less about kinetic weapons now and more about computation, information and 5GW.

In the past, when the Soviet Union put as astronaut into space before NASA, it was a humiliation and a psychological defeat - but the USA arguably still held strategic advantage where it counted at the time, which was here on earth, with more nuclear missiles, tanks and military bases than the USSR.

The US space program kicked into overdrive, and NASA was able to slingshot past the Russians, and over time and across more dimensions, the Soviets never caught back up or retook the lead - in anything.

To this day, Russia’s resurgence onto the world stage - articulated through concepts such as Neo-Eurasionism or “Third Rome” (basically their version of “Manifest Destiny”) - is more than anything, an aspirational framework for “getting up to speed”, while rationalizing their inability to do so in traditionalist, volk-ish trappings.

Their high priest of this quixotic mix, is “Fourth Political Theory” author, university professor and philosopher, Alexander Dugin - whose other titles include “Last War of the World-Island” and - perhaps most tellingly, although least known of his works here in the West - “Katechon and Revolution”.

The word “Katechon” (from the Greek: ὁ κατέχων / τὸ κατέχον which translates loosely as “the Restrainer”) is important in the Russian collective psyche because it contains a massive “tell”.On its surface, it’s supposed to encompass Russia’s “state messianism” and symbolize its opposition to The West - their “Antikeimenos”.

The day of the Russian invasion of Ukraine, Dugin posted on Facebook “Now we are in a war of the spirits. Katechon vs. Antekeimenos”.

Antikeimenos (from the Greek: ὁ ἀντικείμενος) is the term St. Paul uses in Thessalonians 2:4 for the figure of the Antichrist. It appears exactly once in the Greek New Testament, in that single verse. The literal sense is “the one who opposes” or “the one set against”.

And therein lays “the tell” - what the Russian collective psyche is admitting to, and trying to come to grips with, and it is this:

If we reframe the Cold War as the first technological contest between Great Powers, Russia has to confront the fact that they lost - and they’ve never been able to recover from it.

In the contemporary pantheon of international relations and political economy, absolutely nobody today thinks of Russia as a “great power”. When you peel back the ideations of “The Fifth Empire” or “The Soviet Union 2.0”, you get to that underlying underdog mentality - trying to recapture super-power status.

They lost the space race. Then the Cold War, and now they can’t even beat the Ukraine.

That was supposed to be an overwhelming military victory, but the Ukrainians, mainly through wholesale adoption of drone warfare, have managed to give the invaders a rough time of it, even penetrating deep into Russian territory using high-altitude balloons to deliver suicide drones.

Make no mistake, all that financial support from the West aside, the Ukrainians have been able to stave off complete defeat through technological means and because cheap, sophisticated weaponry (drones) completely upended the conventional battlefield.Such are the travails of an erstwhile great power that has lost a technological competition. You can bet today’s incumbents - namely the USA and China - understand these stakes, and neither of them has any intention of losing:

• AI

• Energy

• High Performance Computing (which leads us into)

• The Space Race 2.0

• Quantum Computing

This is why the “catastrophic climate change” narrative has been rather suddenly sunsetted in The West (at least, the non-Euro west): we need more energy, including nuclear - lots, and lots of nuclear.

It’s why White House Asset Management (WHAM) is pumping money into quantum computing companies (including, from our wish list: D-Wave, which we hadn’t yet pulled the trigger on).

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The opening theme played out somewhat in reverse this month. After Palantir dropped their already infamous and instantly reviled “manifesto” on X, I watched what was happening, processed it against previously observed patterns and published “The Technate Was Always Coming”, also on X, then via Bombthrower.

Usually I would publish something like that here, and release it later, but it seemed like the moment was nigh and in order to be part of the conversation, I went ahead with it.

It seemed to express a growing cynicism with the mass public on my part, and read, at least for some, as if I was capitulating at last and simply throwing in with The Evil Empire. A couple long-time correspondents called me out on it, privately.

I’m glad it happened in that order, because not only will I expand on my thinking here, but it also forced me to re-check my core premises for my forthcoming release of the new site, replete with an updated “manifesto”, new name, subscriber dashboard - everything.

It’s a…

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In 1992, Francis Fukuyama, Harvard PhD in political science, published “The End of History (and The Last Man)” - I parenthesize the second half of that title because in almost every reference I’ve seen to this book, that part of it is skipped.

It’s just “The End of History” which, according to Fukuyama, meant that with the ascendency of the US and its allies after WWII and the collapse of the Soviet Empire just a few years prior to publication, humanity had reached its “final stage” in the evolution of political economy.

Western liberal democracy was it. There would be no further iterations beyond that form of governance, and from that, an international “rules-based order” (not his phrase) would become the sole organizing framework behind a unified global civilization - and it was all just a matter of looping in the laggards, the throwbacks and the holdouts.

Fukuyama was apparently once a student of Samuel P. Huntington, who was having none of this. When “The End of History” dropped, Huntington gave a lecture at the American Enterprise Institute which was then developed into an article for Foreign Affairs1 the following year. It was one of the most incendiary articles published in FA - because it challenged the complacency that was setting in amongst Western elites and threatened to disrupt the Cold War victory laps.

There would be no world civilization, Huntington asserted. There were somewhere between five and seven civilizations on Planet Earth, which were:

• The West (Western liberal democracy of North America, Europe and Australia/NZ)

• Sino-Asian: China, Southeast Asia

• Japan was a civilization unto itself

• Islam

• India and the broader Hindu cultural sphere

• Eastern European / Slavic - The Russians, down but not out

• South America / Latin America

• Africa (possibly)2

The West may have emerged as the most economically and militarily powerful one, but make no mistake - the others weren’t going away.

More importantly, these other civilizations were fundamentally different from Western liberal democracy. They would never become like us, so international relations of the future entailed seeking geopolitical equilibrium with these other civilizations.

Huntington went further - he said that future conflict wouldn’t be between nations or political systems like nearly everything that led up to the two world wars, or the Cold War after them.

Future wars would be civilizational wars: between cultures not countries.

He also said that the civilization that threatened ours the most was (wait for it):

Militant Islam.

We have to tread carefully here, because even Huntington has been criticized in the past as generalizing the entirety of Muslims as a geopolitical threat, despite the fact that he himself acknowledged reform-movements and progressive currents within modern Islam.

(It’s worth noting here that Canadian scholar W. R. Clement, whose work on the role of mental abstraction in catalyzing The Enlightenment I cite frequently, published an evenmore obscure book about what Huntington called “the Islamic Resurgence”, titled “Reforming The Prophet”).

To put it bluntly so we can get to the point: nobody is saying “all Muslims are bad”, but what is arguable is that some geopolitical fulcrum points of their world (Iran, Yemen and the sectarian flows of migrants everywhere else) are fanatical militants. Very similar to how there are Western factions dominated by “NeoCons” (many of whom are clinically insane).

Unlike Huntington and Fukuyama, I do not have a degree in political science or international relations, so I’m basically armchair-ing it.

But my suspicion has long been that it was crude and naive to think of political events in terms of clean denominations of countries, nations or even political parties.

There are factions, and tribes and - to Huntington’s point - cultures.

Many have drawn attention to the fact that the events of 9/11 and what happened thereafter seemingly played out a blueprint “Rebuilding American’s Defenses” that was laid out pretty clearly by The Project For A New American Century (PNAC) in September 2000 (but which first appeared in 1996, published in - guess where? A Foreign Affairs piece by William Kristol and Robert Kagan).

It named five nations who were specifically hostile and posed a threat to American hegemony: North Korea, Iraq, Iran, Syria and Libya; and it ruminated that it may take too long to prosecute a long, drawn-out campaign against these forces, absent some reason to accelerate it…

“Further, the process of transformation, even if it brings revolutionary change, is likely to be a long one, absent some catastrophic and catalyzing event – like a new Pearl Harbor.”

A year later, we get 9/11 and ever since there’s been a lot of speculation around “MIHOP” vs “LIHOP”3. It changed everything, ushered in the Surveillance State, not justin the US but everywhere, and started the process of knocking off the hostile regimes outlined.

This almost brings us to Iran.

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The “GIC” doesn’t mean the world tipped into a disorderly state of rampant idiocy (that’s already happened), but the opposite: the intelligence systems we started deploying in the early 20s got so good, they brought about a deflationary economic implosion.

Reading it kept me awake a couple of nights, if I’m honest about it. I forwarded copies to my C-team at easyDNS and sent it around to some CEO colleagues.

Tellingly, I decided not to run it in our AxisOfEasy tech digest, because it was just too unsettling. I’m still digesting it, but coincidentally some of the messaging I received over the same period of time as I was reading it seemed to confirm the premises therein.

From an AI ringer I was hiring to stand up some MCP servers in front of our APIs1:

“Honestly, I’ve had an interesting 2 weeks. My workplace has bee…

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It’s been awhile since I mentioned “hypernormalization” here; for the newer readers who may be unfamiliar with the term, I’ll explain what that means.

It was coined by the Russian writer Alexei Yurchak in his 2005 book “Everything Was Forever, Until It Was No More: The Last Soviet Generation”. It’s a dense, tough read, but the term was later picked up in 2016 by the UK filmmaker Adam Curtis in his documentary by that name (currently available in its entirety on YouTube here).

“Politicians, financiers and techno-utopians, rather than face up to the real complexities of the world, retreated. Instead, they constructed a simpler version of the world, in order to hang on to power. And as this fake world grew, all of us went along with it. Because the simplicity was reassuring.”

Curtis’ interpretation of hypernormality differs from Yurchak’s in that the former asserts we all went along with it out of convenience (which I dispute, tbh), whereas the Soviet system was imposed on the entire population through generations of brutal repression.

I think here in the West, hypernormality is an outcome of institutionalized conditioning (propaganda) borne on the exigencies of an unsustainable monetary base and perverse incentives. Nobody goes along with it as much as they are roped into it, mostly unconscious of the process.

In the closing days of the Soviet Empire, state communism had run its course to the point where all reality-based signalling had been negated. Because everything had become subject to the diktats of party ideology, it was impossible to know, or certainly express the truth about anything, because doing so carried the real risk of running afoul of The State.

It was an untenable position for all involved, and it was also an intractable problem; the only course of action was for everybody to outwardly feign belief and fealty to various constructs which were by turns impossible, blatantly false or just plain absurd.

The proletariat joke summed it all up aptly:

“We pretend to work, and they pretend to pay us”.

When the centrally-planners set nail production in a factory based on quantity, the workers simply adjusted the line to produce tiny nails in the prescribed amount.

After the planners attempted to thwart the scheme by switching to quotas based on weights, the shop floor adjusted again: rolling one, gigantic nail off the line that met the quota for the day, and then going home.

The story is possibly apocryphal, arising from an analysis of Goodhart’s Law (“When a measure becomes a target, it becomes useless” - I also once wrote about this as it related to those endless customer satisfaction surveys we’re all subjected to).

I’ve previously mangled a Voltaire quote to say that “hypernormalization is the art and science of making the masses believe absurdities”1

In a fully hypernormalized world, media personalities look at the camera with a straight face and declare that the surge in turbo cancers and infertility since the COVID vax roll-out could be caused by anything other than the vaccines: climate change, video games,white supremacy, you name it. We don’t know it was the vaccines, and we never will, because political and ideological imperatives prohibit the question.

When the inflation ignited by the COVID stimulus became too persistent and pronounced to ignore, it was ascribed to grocery store CEOs and corporate avarice (“greedflation”), then later, Trump Tariffs.

Within the last year, we’ve seen horrific mass shootings and at least one high-profile assassination (Charlie Kirk) carried out by people who have transitioned their gender, recently culminating in the Tumbler Ridge shooting in BC, Canada’s worst murder spree in over 40 years (since Marc Lepine killed 14 women on the campus of L’École Polytechnique, in Montreal in 1989).

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Due credit goes to Addison Wiggin, from the Grey Swan Fraternity, who recently put out a piece entitled “Repricing Legitimacy”. It touches on many of the same themes we’re monitoring here: the widespread disaffection of the younger generations, and the loss of faith in legacy institutions - albeit, as we’ve noted above, somewhat ironically juxtaposed with a renewed enthusiasm for Big Government and even collectivism.

“Our job isn’t to pick a slogan or a side. It’s to recognize where legitimacy is being rebuilt, where it’s being faked, and where it’s quietly draining away.

Revolutions without plans tend to end in terror and sorrow. Systems without trust eventually seize up.

Cycles don’t care what we believe. They respond to balance. And balance, right now, is being renegotiated almost everywhere at once.“

Over the coming year Addison and I will be collaborating on a larger project, which we each view as a logical extension of the original Sovereign Individual thesis. Details to follow.

In the meantime, we’re left with making sense of events on the ground.

Drawing on source material mentioned earlier, plus a few others:

• Viktor Shvets’ “Twilight Before The Storm”

• Jeffrey Towson’s “What Would Ben Graham Do Now?”

• Daniel Bell’s “The China Model”

The common theme seems to be that they are books which filled me with revulsion and dread the first time I read them.

Shvets’ thesis is point blank: the old neoliberal capitalist consensus has collapsed and no new model has yet emerged, but all indications are that it’ll include some kind of socialism (my extension on this is that we’re headed for a two-tier system of techno-socialism for the masses, and state capitalism for the asset holders).

If you hear Shvets on any interviews, he usually blames the markets for breaking down - saying, in effect, that “the market model has been discredited”. I would beg to differ, saying that the market functioning has been completely coopted by government interventionism and fiat debasement, but at the end of the day it doesn’t matter. The dysfunction is real.

He makes frequent references to something called the “Fujiwara Effect”, a meteorological term for when multiple hurricanes converge into a single, humongous, cataclysmic storm. The analogy here is the compounding of multiple negative cycles: financial, with the debt bubble; technological, with the existential disruptions coming from AI - and he also puts “climate change” in there, which I actually view as the one thing we don’t have to worry about, at least not now.

It’s still a fitting term for what we’re headed into: some kind of transition that won’t be incremental, but “rupture”-like.

Towson, whose book is over a decade old, reframed value investing as not only a game of mental chess with “Mr. Market”, but as one where “Mr. Government” had entered the chat. Investors and entrepreneurs would henceforth have to take the ever-increasing regulatory and ideological biases of The State into account when making their allocation decisions.

Daniel Bell himself defended criticisms that he was extolling a China-style command economy, which he maintains he was not, but that the point of his book was that nobody can dispute China’s results in operating that way. It works. Or at least it did (they too, have an enormous, untenable debt bubble, just like everybody else1).

If there is a common aspect to these models it’s that policy starts to crowd out price discovery.

We’ve been dancing around this realization for a long time; this is what I’ve been intuiting every time I said that shorting anything was a fool’s errand because markets are now structurally hardwired to go up - more so than at any other time in history.

That’s fiat debasement at work, and it puts the entire universe of assets on an escalator, and from there it’s a matter of picking what will outperform the rate of decay in our denominators.

Tyler Durden’s phrase “White House Asset Management” (WHAM) is telling us that intrinsic value is now a political function, at least partially so. Imagine being short MSTR only to wake up some morning and find out that Trump put out a tweet during his morning dump announcing that the US government just took a 10% stake in MSTR, MARA and HUT/ABTC.

Nobody should be surprised if that happens. Not anymore

Which is one of the reasons why I suspect, despite its massive retreat over the last year, there isn’t much of a short position out on MSTR. Perhaps the market is aware, even subconsciously, that sitting on the largest corporately held treasury of BTC on Earth makes it a kind of geopolitical honeypot. Especially at an mNAV flirting with 1.

For many years I’ve taken pains to chart a largely libertarian, if not anarcho-capitalist path, the crux of which was trying to conduct myself with no regard to who was in power or which party formed the government.

I basically tried to tune out The State. I’ve conceded that it’s become much harder to do that since COVID, but I was still making my investment and capital allocation decisions from a market forces perspective.

And that is what is changing now. Our overall thesis may be unperturbed: The Great Bifurcation, Monetary Regime Change, etc. - but I am now grudgingly acknowledging that The State is going to impact our economic calculus more than I’d care to admit.

Those above-mentioned books which filled me denial and dread when I first read them, I’m now re-reading to adjust my investment theses around them.

I’m not exactly happy about it, but I give you, The SOS Portfolio (Sovereignty or Serfdom)

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“Beginning today, we will govern expansively and audaciously… to those who say the era of Big Government is over, hear me when I say this: no longer will city hall hesitate to use its power to improve New Yorkers’ lives.”

— Zohran Mamdani, Inauguration speech, Jan 1, 2026

“We will replace the rigidity of rugged individualism with the warmth of collectivism”

— also Mamdani. Same speech.

This edition’s opening graphic is the cover of an updated edition I once put out of Eugen Richter’s “Pictures of the Socialistic Future”; written in 1893, it was not translated into English until 1907 (you can pull down a copy here).

Hearing the Zohran Mamdani inauguration speech on New Year’s Day didn’t punch any holes in my thesis. New Yorkers voted for this. Or at least some of them did:

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I have good news and bad news.

From where I’m sitting, the famous “Four-Year Cycle” that has so far governed the ebb and flow of Bitcoin’s price action, at least in fiat terms, is over.

That’s the good news - it’s something that Bitcoiners have been pining for every cycle.

The four-year cycle was basically three “up” years, punctuated by a down year. The halving came in year two of the up-wave.

However, the way Bitcoiners were hoping we’d negate that structure and “escape the crypto wheel of karma” so to speak, was to simply keep grinding higher beyond that third year. Up-only, forever.

That doesn’t seem to be the case. We’re approaching the end of the third year of this cycle and instead of getting our parabolic, blow-off top, the “Banana Zone”, replete with “Uptober” and “alt-season”, we’re quite possibly in a bear market, right now. Year three may be a down year for Bitcoin and cryptos.

In fact year three in this fifth epoch has been such a dud (relatively fresh ATHs aside), that in absolute terms, Bitcoin looks like it could underperform US treasuries in 2025.

The weakness in Bitcoin is mostly macro - exacerbated by some serious structural damage in the aftermath of the Oct 10th crash when some ADLs (auto-delveraging algos) at at least one major exchange, went berserk and set off a cascading wave of liquidations that zapped more crypto-wealth in a single day than was lost over the entire 2021-22 crypto winter.

The sentiment in Bitcoin and crypto right now is possibly the worst I’ve ever seen and the FUD is deafening (see below).

My suspicion is that the grain of sand in the macro markets that has shifted and may cause a disorderly phase-shift globally has once again originated out of Japan - where their bond market seems to have finally snapped:

The JPY 30-year punched above the 3.3% line while the 40-year hit an all-time high at 3.697%. These are levels at which traders can borrow short-term Japanese paper at lower rates and simply recycle them into the long bonds - it’s the carry trade all over again, except this time they aren’t buying US treasuries.

More telling, perhaps, is that both the 30Y and 40Y bond yields hit all-time highs after the government announced a 17 trillion yen ($110 billion) intervention, which was supposed to have the opposite effect.

Does any of this sound familiar?

We’ve only been typing “something, something, something… and then bond yields went the wrong direction”, every single month since September 2024.

The specifics of the “something” aren’t as important as the punch line in all these instances, which is that bond yields are not conforming to the machinations of central bankers and governments.

Why is Japan always spoiling the party for global markets?

“Japan holds the world’s largest public debt burden, exceeding 250% of GDP, or roughly $10 trillion. For decades, the BOJ has kept borrowing costs artificially low through massive quantitative easing (QE) and YCC, capping the 10-year yield around 0–1% to make this debt manageable.”
— @BlockchainTekUS

In the two graphs above, the one on the left shows the Japanese 10Y executing one hell of a hairpin reversal off the stimulus news, while the one on the right was posted by Lawrence Lepard, with the simple caption “No bueno” - the longer duration paper had been rising ever since newly installed Prime Minister Sanae Takaichi’s administration started signalling a forthcoming stimulus initiative.

On November 18th, bond yields on the 10Y, 20Y, 30Y and 40Y all hit new highs as it became apparent that the government would push ahead with the plan.

Bitcoin started skidding along with global markets on the 19th, and then did a massive “it’s over” dump down to $81K on November 21st, when the cabinet approved the package.

The reason Bitcoin, and everything else dumped (including gold), was because the market was calling “b/s” on the sustainability of the entirety of Japan’s cap table. That set off a credit event: a global margin call and yet another Japan-induced liquidity crisis.

What’s true is Bitcoin and cryptos fell the hardest in all this; they always do, but this time they exceeded themselves. My guess is it was all exacerbated by the structural damage induced by the Oct 10th mass liquidation event (thanks Binance).

Long term, the markets are going to realize that the policymakers have lost control of the bond markets - and that’s when we’ll see an intensified bond exodus into things like gold, Bitcoin and high quality businesses.

There is something else to take note of in Japan because it too portends events everywhere else.

After decades of money creation that finally culminated in inflation after the pandemic, the need for stimulus never abated, but the perception that “QE Infinity” and “money printer go brrrr” causes consumer prices to rise makes it harder to do, politically.

Some are saying that these rising bond yields being signalled out of Japan means that “the era of cheap money is over”. Not so fast.

What we’re seeing now is the stimulus mechanism shifting from outright expansion of money supply and looser credit conditions by the central banks (a.k.a. “cheap money”), to fiscal stimulus by the government, which is creating new spending programs, picking winners and losers - and funding the entire thing through new bond issuances… that will be monetized by the central banks.

All of which increases the total government debt load, which means if the bond yields won’t behave, the central banks will have to engage in yield curve control.

No matter what happens in this great shell game of governments operating beyond their means - what comes out the other side of it is: debasement.

When the next existential, macro crisis comes, liquidity is going to get pumped through some convoluted Rube Goldberg machine that simply outputs a debt instrument called “money” under some new guise…

he US is signaling the same, with talk of a $2,000 “tariff dividend” per household, and to a lesser degree (so far) the machinations on the part of the Treasury to undertake what have been called “stealth QE” measures over the past year with various bond buybacks.

Which brings us to the ongoing tensions between the Fed and the Treasury department, which may now be in the process of erupting into full-blown civil war, replete with private sector proxies on each side: JP Morgan on the side of the Fed, and Strategy, perhaps, on the Treasury Dept’s.

The Cold Civil War: Financiers vs Fintech

For months now, we’ve been commenting on how some manner of internecine conflict has broken out between the US Treasury Department and The Federal Reserve.

Further, that the Fed seems oddly standoffish around the idea of CBDCs and digital dollars - which is contrary to nearly every other central bank around the world.

Meanwhile, the Treasury department is the entity pushing forward “the stablecoin standard”; and the executive orders for both the BSR (Bitcoin Strategic Reserve) and the crypto stockpile fall under their aegis, not the Fed’s.

This tension was largely under the radar until recently, and here’s where things seem to get really wild:

There’s a cogent case to be made that this has all spilled out into a proxy war between the old guard banking system - i.e. the banking giants, namely JP Morgan, with the Fed as its titular head - and the newly emerging “fintech” based world being pushed by the Treasury, and championed by the likes of Tether, and Strategy.

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It’s that time of year for me when I start to feel the onset of winter weighing on my energy levels and mental attitude. The fun part of fall is over - the colours, the leaves, punctuated by bouts of warm weather; now we’re a few days past the clocks rolling back, and hitting four or five months of grey, sleet, slush and sunset at 4pm.

It’s usually a rough patch for me. From the time daylight saving kicks in, I’m usually counting days and trying to white-knuckle it through until the solstice (December 21) without losing my marbles. After that I know that each day is tacking on a few extra minutes and that’s usually enough to keep me out of the psych ward until spring shows up.

Add to that, “Uptober” being was a dud and we’re at the point where if there is a four-year cycle still in play, then it means this could possibly be the topping process, right now (see “This Month’s FUD”, later this letter).

If so, then it’s been an atypical cycle in all respects - from racking up multiple fresh a…

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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”.

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Coinbase Head of Institutional Research David Duong sees the market cap for stables hitting $1/2 trillion by 2028 (which would be roughly a double from where we are now).

Demetri Kofinas recently interviewed Charles Calomiris, former Chief Economist at the US Office of the Comptroller of the Currency, and it was eye-opening to hear someone of his stature speak so matter-of-factly about how the structure of the banking system is evolving in realtime, to wit:

• Stablecoins could replace checking accounts for dollar-denominated payments, potentially eliminating the need for traditional banks as intermediaries in the payment system.

• The separation of lending and payments through stablecoins could lead to a reduction of systemic risk in areas where bank lending has become increasingly overconcentrated.

• Yields will approach, if not surpass those provided by money-market accounts and t-bills.

Which is why…

• Incumbent banks are actively trying to slow down the adoption of yield-bearing stablecoins by blocking interest payments to consumers as part of a political compromise.

But it ultimately won’t matter because:Stablecoin issuers will likely use derivatives to work around any prohibitions on paying interest.

The ultimate upshot of this, which is not surprising, is that stablecoins are in the process of becoming significant buyers of government debt (we’ve already covered how Tether is one of the top holders, and now buys more US T-bills than Germany).

If we needed more evidence that stables were in the process of being baked into the financial system, the US CFTC (Commodity Futures Trading Commission) is now looking at allowing tokenized assets, including stablecoins1; they’re soliciting comments from stakeholders until October 20th.

Even the IMF, who has traditionally loathed crypto and holds an acute animosity towards Bitcoin in particular, published a piece in their early September edition of Finance and Development, to:

“assess the macroeconomic and geopolitical implications of widespread adoption of US dollar–denominated stablecoins around the world”.

It’s rife with the requisite rumination around financial stability and crime, but they do say the quiet part out loud:

“New entrants like fintechs and big techs, and new products like crypto and stablecoins, are challenging incumbent financial institutions.”

They’re not wrong, which is why we’re all about owning those fintech challengers, among them - as per our earlier trade alert - Circle (NASDAQ: CRCL), which we’ve recently entered.

US Stablecoins vs Euro-CBDCs

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We’ve seen an Executive Order expressly ruling out CBDCs in the US, but as I keep warning readers: we’re seeing components we’d expect to see under a CBDC system appearing - only they aren’t originating at The Fed (who has never really expressed an interest in them, anyway).

Now the US Treasury Department is seeking comments on Digital ID as it relates to DeFi:

“The Department of the Treasury has filed a request for public comments to provide input on the use of "innovative or novel methods to detect and mitigate illicit finance risks involving digital assets" in accordance with the GENIUS Act, as well as in accordance with Dona…

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I’m starting on this month’s Bitcoin Capitalist Letter fairly early into the month - when we’ve just heard from on high that, yes, Jeffrey Epstein killed himself and there’s “nothing to see here”.

It’s been astonishing, if not disappointing, to watch some of the most vehement “MAGA” berserkers flip from: "Release the Epstein files and convene tribunals" to "Of course he killed himself!" - literally overnight.

Dinesh D'Souza and Ben Shapiro were among the MAGA all-stars who suddenly found it distracting to be navel-gazing over who the Epstein clients actually were and whether anyone in power was compromised by their involvement with sexual predation.

Now, some of the most ardent, supposedly red-pilled influencers are literally doing the meme…

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This writeup is from the full Bitcoin Capitalist Letter which came out on August 2nd.

Right now the “it” ETH treasury company is Sharplink Gaming (SBET), a consistently money-losing “online performance marketing” company, whose stock mooned after announcing their new strategy.

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Bond yields are continuing to flash bright red warning signs, not just in the US - but globally.

Completely unnoticed (or ignored) within mainstream media circles, is what happened over about a week in May; here’s a timeline:

• In early April - a few days after Trump’s “Liberation Day” tariffs bombshell - the long end of the bond curve started ramping higher across the world.

• On May 16th, Moody’s downgrades US debt from Aaa (“Triple-A”) to Aa1.

• On May 20th Japan has their worst bond auction since 1987.

• On May 21st, the US 20-year bond auction stiffs.

• On May 22nd, Bitcoin posts a new all-time high.

Recall, we were among the first to put forward the idea that one of the most important macro tailwinds behind Bitcoin would be a bond exodus - back when The Crypto Capitalist Manifesto was published - and it's a theme which is now playing out in spades before our very eyes.

Let’s dig in:

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What seems evident in the rear-view mirror is that somebody knew that Trump would ease off the pressure, and positioned themselves accordingly, as per @unusual_whales:

“I think people knew of the tariff pause and traded it beforehand.

You can see before Trump posted "buy" on Truth Social, traders opened $QQQ $TQQQ and $SPY calls

RIGHT BEFORE THE NEWS, someone opened $SPY 509 calls, expiring TODAY!!!!!!!!!!!!!!!!!!!!

Those calls are up 2100% in one hour.

You can see all volume was literally opened TODAY!!!!!!!!!! (That little green arrow). You can see all volume is new opening volume (not only on the Zero days, but also on the weekly $QQQ and $TQQQ calls). This is especially odd given IVR on these was around 82 this morning, with IV through the roof. The traders really wanted to trade directionally…

Insane, someone knew.”

Seeing the spike in open call options, many others no doubt piled on, before largely closing out their positions a few hours later and banking millions:

This doesn’t surprise me, given my belief that the entire political class is venal and corrupt.

How sustainable is this relief rally?

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We’ve been talking about the precariousness of the global financial system since the inception of this letter, how it’s held together with spit and twist ties and is now so structurally dependent on debt and liquidity that it is impossible to let true price discovery work: whether it’s interest rates or financial assets - if we allow rates to reflect the actual level of risk in the system or let assets mean revert, it’s game over.

Which is why every time we’ve witnessed a speed wobble in the markets or the monetary system, we see policy makers and central banks swoop in with frantic tweaks and stick saves in order to re-levitate everything and keep all the plates spinning.

Anything else, and we end up somewhere between The Mandibles and Mad Max.

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