Netizen Premium | Bitcoin Deep Dive #9

Is the U.S. Too Big to Fail?

The Bond Market Always Tells The Truth

While most people were fixated on stock market volatility last week following escalating US-China tariffs, the bond market is revealing a far more consequential truth about America's financial standing. President Trump's assumption of leverage in trade negotiations severely underestimates the power our creditors wield, as evidenced by market flows since we pivoted to RISK-OFF on March 3rd: with the USD down 6.6%, gold up 12%, and Treasury bonds down 6%. These flows, resembling patterns typically seen in emerging market crises rather than the world's reserve currency, suggest the unthinkable—that the United States is not, in fact, "too big to fail." We are likely witnessing the early stages of cracks in America's global reserve currency status and potentially observing a historic reordering of the international monetary system. This represents a once-in-a-generation period of profound structural change, where established institutions weaken and new economic orders emerge. If you know me personally or have been following for a while—this is exactly what I’ve been preaching since COVID.

TLDR: The dollar down, gold up, Treasuries down pattern since March 3rd mirrors classic emerging market crises—validating our long-standing Bitcoin thesis that we've emphasized since the COVID money-printing began.

The twin deficit problem (combining fiscal and current account deficits) presents a systemic risk that even the staunchest dollar bulls can no longer ignore. Specifically, the U.S. fiscal deficit stands at a troubling 7% of GDP with a current account deficit of nearly 4%—creating a combined 11% twin deficit that far exceeds sustainable levels for any reserve currency economy, ever in history. These structural imbalances, coupled with the fact that global investors own $16 trillion in U.S. securities (56% of the market, up from 36% in December 2021), have created a hypersensitive situation where even modest policy missteps could trigger significant capital outflows. Our quantitative metrics clearly indicate we remain in DEFLATION from a market regime perspective, while the macro regime persists in STAGFLATION—both distinctly RISK-OFF conditions. This is confirmed by negative momentum across stocks, crypto, and US Treasuries, with the USD in a neutral position (though currently oversold) and only gold showing bullish signals.

TLDR: America's combined 11% twin deficit (fiscal and current account) creates structural vulnerability to capital outflows—as triggered by Trump's tariffs—which will eventually lead to financial repression and monetary debasement.

The world is fundamentally "splintering" along new geopolitical fault lines, with an increasing number of nations diversifying away from USD dependence toward alternatives including gold and, increasingly, Bitcoin. Specifically, China has been systematically decoupling since 2013, strategically reducing their US Treasury holdings from $1.3 trillion to just $761 billion today—a trend accelerating among other nations seeking monetary sovereignty. One potential outcome from the recent market turbulence is that the Fed may eventually face the impossible decision of hiking rates during a recession to defend the USD AND expanding its balance sheet to support the Treasury market despite above-target inflation—which is the historical playbook for emerging markets going through a currency crisis. While we remain cautious in the near term given the prevailing risk-off conditions, the path forward largely depends on fiscal and monetary responses, which will ultimately determine how quickly we transition from current market weakness to the bull case for Bitcoin—a shift that could be dramatic once authorities resort to their inevitable playbook of monetary expansion.

TLDR: We're in a critical waiting period, watching for fiscal and monetary responses that will trigger the inevitable global monetary realignment—a shift that will likely substantially benefit both gold and Bitcoin.

In the following section, we examine Bitcoin's on-chain metrics to uncover strategic positioning opportunities during this period of historic monetary transformation.