Netizen Premium | Bitcoin Deep Dive #18

Should Bitcoin Bulls Worry About The Israel-Iran Conflict?

Risk-On Goldilocks Still Rules

We remain in GOLDILOCKS market regime where the majority of global markets are confirming the RISK-ON trend. Bitcoin and the S&P 500 remain in BULLISH momentum, as global liquidity accelerates at a +14% annualized pace, driven by synchronized central bank easing worldwide. Our analysis shows systematic funds remain underweight equities despite the rally, suggesting limited crash risk over the short to medium term. The optimal asset allocation for this environment heavily favors risk assets, with broad exposure to stocks and Bitcoin capturing the positively skewed return distribution. Broad-based disinflation across goods and services is keeping central banks dovish, with the global benchmark policy rate down over 100 basis points from its March 2024 peak.

TLDR: Bitcoin and stocks thrive in the current risk-on regime of steady growth and falling inflation, with global liquidity accelerating.

Middle East Conflict Threatens The Party

The biggest threat to this risk-on environment comes from the escalating Israel-Iran conflict, which could trigger a sharp spike in crude oil that undermines the global liquidity uptrend. Oil currently sits NEUTRAL momentum but is nearly overbought, making any geopolitical shock potentially explosive for energy costs worldwide. A sustained breakout in BULLISH momentum for crude oil could flip the macro regime from GOLDILOCKS to risk-off STAGFLATION, where growth slows and inflation accelerates. This shift would likely end the bull market in risk assets temporarily depending on how the Federal Reserve responds. Beyond the immediate market impact, sustained energy inflation would accelerate fiscal pressures by forcing higher government spending on energy and defense subsidies while simultaneously reducing tax revenues from slower economic growth.

TLDR: The escalating Middle East conflict poses the primary near-term risk to Bitcoin's bull run by threatening to spike oil prices and strangle global liquidity.

Fiscal Math Favors Bitcoin

The U.S. faces a fiscal trilemma with only three solutions: cut government spending, grow the economy to shrink the debt, or monetize deficits by printing. Spending cuts remain politically impossible for both parties, evidenced by the $3 trillion "One Big Beautiful Bill" that will overwhelm any DOGE efficiency savings. The Trump administration is attempting option two through stimulus-driven growth, but with a 6.7% deficit and $11.5 trillion in Treasury supply hitting markets this year, the math is improbable. Mandatory spending (social security, etc.) consumes 62% of the government budget at $4.5 trillion, growing 12% annually and faster than revenue growth, making fiscal consolidation through growth virtually impossible. The inevitable outcome is monetary financing, accelerated by the next Fed chair who will likely target 3% inflation versus Powell's legacy 2% framework. This fiscal dominance will eventually force direct Fed intervention in Treasury markets as foreign buyers continue pulling back from purchasing U.S. treasury debt.

TLDR: With Trump's $3 trillion spending bill unlikely to stabilize our debt-to-GDP ratio, we remain structurally bullish on Bitcoin as eventual money printing becomes mathematically certain.

Below, we’ll dive into our Dynamic DCA model that supports our Bitcoin investment strategy, including on-chain risks we see emerging: