Bitcoin outshines Ethereum, rate cuts begin: TBL Weekly #110
Good morning Readers! Welcome to TBL Weekly #110 — grab a coffee, and let’s dive in.
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ETH is becoming a joke
Watching the ETHBTC pair bleed out must be painful for those dual bitcoin-Ethereum holders out there. You could have had it all, but instead, you chose to try to play both sides. Bitcoin now towers over Ethereum to the tune of 4x, a ratio that we believe will only grow over time. Closing the week around $60,000 puts bitcoin a half year into a steady consolidation, one without as much volatility as in previous cycles. But the second-place cryptocurrency is melting, and it’s a wonderful development for bitcoin holders. The King will receive marginal allocations where diversified approaches once existed. Can you imagine if we had named our company The Crypto Layer?
Treasuries are back in style
US Treasuries are back above the 100 line on a trailing 12-month basis, meaning that holders of USTs are in the green over the past year. Interestingly, gold has passed the stock market over this time horizon, while bitcoin looks in its rearview mirror at the traditional investment universe with a sly smile.
The rally in Treasuries has been joined by a global bond rally as central banks in Europe lead the step function lower. Global cuts strengthen the dollar, but the Fed can keep a lid on this tight financial condition with cuts of its own. That is what we’ll get next week with the first rate cut of the cycle. FOMC members meet on Tuesday and Wednesday, with Jerome Powell’s press conference on Wednesday at 11am PST. Believe your eyes: the forward Fed Funds rate toward the end of next year is at 2.8%. Get your scissors ready!
For a full breakdown, don’t miss our global macro update from Friday, complete with 21 charts and a full rundown of everything you need to know heading into next week’s rate cut. These Friday updates have become the flagship videos of our growing channel and represent my best effort to summarize the week.
And if you don’t have the 42 minutes to spare, here are some of the key insights:
Interest rate dynamics: The breakdown of US Treasury yields signals a wave of demand that is explained by a collapse in growth expectations and incoming rate cuts. Historically, the market often anticipates Fed actions, leading to earlier adjustments in yields.
Treasury demand: The overwhelming demand for Treasuries, despite increasing supply, indicates a strong belief in their reliability in dangerous (or slowing) times. This is crucial in a climate of economic uncertainty, as investors flock to perceived safe havens.
Bitcoin’s growth: Bitcoin’s dominance is increasing, as evidenced by its market cap relative to Ethereum’s. This positions Bitcoin as a leading asset in the cryptocurrency space, reinforcing its role as King Bitcoin.
Gold’s resurgence: Rising gold prices suggest a renewed interest in precious metals as a hedge against liquidity waves. This aligns with historical trends where gold performs well during periods of monetary easing. We look at gold versus real yields and a reversal of an earlier narrative that investors were dumping Treasuries for gold. Update: they weren’t!
Global rate cuts: Anticipation of global interest rate cuts is influencing currency valuations and commodities. Gold and oil are diverging, an important signal on growth expectations.
Stock market influence: The stock market’s reactions to interest rate changes will be crucial for the Fed’s future actions. A stable or rising stock market may delay aggressive rate cuts, while a downturn could prompt quicker intervention by the Fed.
Economic indicators: The interplay between CPI readings and Fed policy indicates the central bank’s focus on financial stability over inflation control. As inflation concerns ease (they have all but disappeared), the Fed will shift its strategy to stimulate economic growth.
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In case you missed it: TBL on YouTube
We kicked off the week with Nik’s interview of Columbia University Law School professor and CEO of the New Civil Liberties Alliance, Philip Hamburger. They discussed the fallout of overturning Chervon, changes in judicial rights and jury access, and dangers of the administrative state.
Check out— Why Overturning Chevron Matters for Bitcoin and Civil Liberties with Philip Hamburger
If you don’t have the 28 minutes to spare, here are some of the key insights:
Separation of powers: In June 2024, the Supreme Court overturned a 40-year old precedent that directed courts to defer to federal agencies’ interpretations of ambiguous laws. The Chevron Doctrine blurred lines between legislative and executive powers, allowing agencies to create laws without Congressional oversight, and its repeal restores the intended balance in government structure.
Judicial independence: Overturning of the Chevron Doctrine means that courts can now exercise independent judgment without being biased towards agency interpretations, ensuring fair trials and justice for individuals facing enforcement actions.
Legislative authority: By requiring clear Congressional authorization for regulations, the decision enhances agency accountability and aligns regulations with public interests.
Risks of the administrative state: Unchecked growth of the administrative state poses threats to civil liberties, and the repeal of Chevron is a step toward curbing this expansion and protecting individual rights.
Strategic litigation: New Civil Liberties Alliance is actively working to challenge overreaching regulations and restore constitutional rights through targeted legal actions.
Restoration of rights: Recent court decisions grant individuals the right to jury trials in regulatory cases, putting the importance of citizen participation in justice and protecting civil liberties at the forefront.
Next, Nik broke down the 19 Benefits of Bitcoin inspired by a social media post by Daniel Batten and covered how bitcoin offers banking for the unbanked, financial equity, and protects against inflation and government overreach.
Check out—19 Benefits of Bitcoin that Most People Have Never Heard About
If you don’t have the 35 minutes to spare, here are some of the key insights:
Aid for war refugees and financial freedom: Bitcoin helps millions transport wealth securely across borders, and allows refugees to reestablish lives by converting labor into savings. It also enables refugees to carry their savings across borders, offering a lifeline during crises, something that is crucial for those fleeing war and persecution.
Financial empowerment and inclusion: Bitcoin is transforming economies, combating hyperinflation, and enhancing financial inclusion by providing financial equity in regions with gender discrimination. It also reduces fees and delays for families sending money internationally.
Energy solutions: Bitcoin supports renewable energy projects and provides power to underserved communities. Bitcoin mining is increasingly utilizing stranded energy resources, promoting sustainability and energy independence in remote areas.
Economic transformation in Africa: The adoption of Bitcoin in African nations is providing an alternative to failing currencies and oppressive banking systems.
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In case you missed it: TBL on Substack
Every week, we bring you our global events recap TBL Thinks. In our latest edition, we revealed how American car makers are pivoting in the face of Chinese EV car manufacturers and BYD’s less than $12,000 electric car. We also discussed Apple’s latest iPhone launch and its big bet on AI to draw consumers back in. We ended with 3-D printing for housing and commercial real estate, how a Walmart Supercenter’s expansion is the largest commercial 3-D project completed, and if 3-D printing has the potential to be more cost effective and faster than traditional construction.
Here’s an excerpt on the looming threat American automakers face as China comes for their marketshare.
“So why does the Chinese car maker BYD “Build Your Dreams” have everybody quaking in their boots? The company overtook Tesla to becomes the world’s biggest electric car company in the final quarter of 2023. BYD is selling its EV Seagull for less than $12,000—the current administration is looking to effectively ban the Chinese car company by quadrupling import tariffs from approximately 27% now to 100%.”
Check out TBL Thinks here:
Sneak Peak into what our Pros Got
This week, TBL teamed up with Unchained to release its big report titled “Understanding What Moves Bitcoin” which covers how liquidity impacts bitcoin, what makes bitcoin fluctuate in price, and how changes in interest rates affect bitcoin.
TBL Pros received the report early but is now available to the public. Download the report for free here.
Nik also published his weekly letter on “Deep Price Cuts in Real Estate” to explore the intensely bearish view on the economy. Find out why he’s so bearish by going TBL Pro.
Next Week with Nik
In the week ahead, the Fed kicks off its rate-cutting cycle. Whether it cuts by 25 or 50 basis points doesn’t interest us as much as what the statement says and where the committee indicates the policy rate will go next year. Wednesday will be full of vernacular to nitpick, but as always it is the market’s reaction that matters most.
I personally feel quite comfortable with where we’ve guided you on rates this year. With full emotion, I held steady with my view that rates would come back down on slowing growth, inflation would subside, and cuts would arrive. Now that cuts are here and rates have un-inverted around 3.5%, my outlook has ratcheted down. I don’t know how long it’ll take, but rates will continue their path lower and eventually take out 3%. I’ll watch the data and economic anecdotes for motive to reduce my expectations to 1% yields—there’s a growing possibility of 2s trading below 2% by this time next year and bond volatility is demolished by the Fed. Bitcoin stands to benefit in such an environment. Read our incredible free report and pair it with Friday’s episode to put the pieces together on the Fed, liquidity, and bitcoin.
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Unchained empowers you to fully control your Bitcoin with a collaborative multisig vault, where you hold two of three keys and benefit from a dedicated Bitcoin security partner. Purchase bitcoin directly into your cold storage vault and eliminate exchange risks with Unchained's Trading Desk.
Unchained also offers the best IRA product in the industry, allowing you to easily roll over old 401(k)s or IRAs into Bitcoin while keeping control of your keys.
Don’t pay more taxes than you need to. Use code TBL for $100 off when you create an account.
Summaries of videos and articles are extremely valuable to me because they save so much time and provide enough information to help me decide whether or not to dive deeper. Thank you!