Chart of the Week | Bitcoin vs Government Debt (1)

Good morning everyone and welcome to our Chart of the Week series! Every week we provide you with one of the most informative Bitcoin charts, sent directly to your inbox. This week we dive into Tariffs and Bitcoin.

Tariff Meltdown - The Big Picture

On Wednesday afternoon, president Trump announced some of the largest tariffs in over a century. It is safe to say that the equity markets, didn’t like what the president had to say. Today, the Nasdaq was down 5.5%, the S&P 500 was down 5% and the DXY dollar index was down 1.5%, at one point down as much as 2%.

Risk markets faced their worst day since COVID and bitcoin has naturally sold off since the announcement. But the picture is actually not so dire, despite a VIX (Volatility Index) above 30.

The Nasdaq Meltdown

Directionally, bitcoin has continued to follow the Nasdaq and understandably sold off with the broader risk-asset complex. Even gold faced significant selling pressure today.

Underneath that surface though, bitcoin is actually holding up quite well. In fact, going back to early March, bitcoin has actually outperformed the Nasdaq, as shown by the BTC/NQ cross below – demonstrating remarkable strength.

Its Actually Much Worse Than You Realize

As dire as the fiscal position may seem, it’s actually much worse than most people realize. The (very) conservative estimate by the Congressional Budget Office estimates that Social Security will be unable to meet all of its obligations by 2034. Social Security and Medicare outlays, which alone are well over 50% of tax receipts ($3.2T/$5.1T), are simply interest on unfunded liabilities.

Someone that entered the workforce in 1965 and started contributing to Social Security and Medicare, they were promised real goods and services decades in the future. The dollars that they were contributing are rapidly losing purchasing power, in terms of real goods and services.

Even if contribution rates raise with the official CPI/inflation data, the real inflation rate is significantly higher. Here we see that, when using the manipulated CPI data, it appears Personal income has been rising. However once using the correct denominator (total money supply), we see that CPI vastly understated real inflation: Reconciling this with the directional travel down, Nasdaq has repeatedly sold off more than bitcoin. While everything has faced weakness, bitcoin has faced less weakness than the Nasdaq, a very telling signal, in our opinion.

However, when Implied Correlations look like this, everything is bound for some red on the screen. Recalling back a few weeks, Implied Correlations measure the degree to which equity indices and their components (on an individual basis), are expected to move in tandem. Spikes in the Implied Correlations are almost always correlated to periods of high instability and broader risk and uncertainty.

Whether or not this is the peak fear, is impossible to say. We personally expect significant and prolonged weakness, given the harshness of the tariffs that were announced. But, one thing is certain: in a world of decreasing cooperation and globalization, neutral assets like bitcoin become all the more appealing.

We have long-spoken about Triffin’s dilemma and the “reserve currency curse”, and it seems pretty clear that the administration understands the issues with the dollar system. If this is indeed true, and we will witness a global monetary reordering over the short-medium term, this is massively bullish for censorship-proof, scarce, and immutable money, like bitcoin.

A key metric we will be watching is the bitcoin/gold cross, which has recently faced pretty significant weakness. We do expect that this eventually reverses, but a good barometer of bitcoin’s long term adoption will be this bitcoin/gold cross rate.

That’s it for this weeks edition, remember to stay humble and stack sats!