Post #2270

Looking at the current market dynamics, a strange but historic situation is unfolding. Traditionally, when stocks decline, bond yields are expected to fall as well. However, right now, we are witnessing a rise in US bond yields (reasons already mentioned in previous post), signaling that the US government will have to pay more to raise debt in global markets. This rising cost of debt leaves the US with very limited options - primarily, printing more money to meet its growing interest payment obligations. Printing more money, combined with recently imposed tariffs, is bound to stoke domestic inflation. This points towards the US already entering, or being dangerously close to entering, a phase of 'Stagflation' - a toxic mix of stagnating growth and high inflation. Going forward, the US seems to have only 3 choices: 1- continue printing money, 2- find new stakeholders to buy their bonds, 3- aggressively work on reducing trade and budget deficits. Amidst this backdrop, crypto emerges as a silent but significant beneficiary. While current geopolitical tensions and the unwinding of the global carry trade have put downward pressure on crypto markets, the internal fiscal and monetary imbalances of the US will eventually push crypto upwards. It appears that Q1 and Q2 of this year might remain challenging for crypto but Q3 & Q4 we could see a drastic positive turnaround. Interestingly, the US is now moving towards embracing crypto, not out of choice but out of necessity. At the same time, the rest of the world, wary of letting the US gain an unfair advantage as it did with the US dollar's rise to global reserve status, will also be forced to adopt crypto at a much larger scale.