Netizen Premium | Bitcoin Deep Dive #5

Trump Playing Chicken With The Fed & What It Means For Bitcoin's Rollercoaster 2025

Short Term: Markets Signaling Risk-Off Environment

The market is currently in an INFLATION risk-off regime, rewarding defensive positioning over growth assets. Current indicators show equities turning bearish while Bitcoin maintains a neutral momentum signal. The high-beta/low-beta ratio has broken down below levels seen during August's correction, suggesting deeper concerns about economic growth.

Key style factors reflect this defensive rotation: value is outperforming growth, large caps are beating small caps, and dividend-focused strategies are among the few bright spots. Meanwhile, gold has turned decidedly bullish, reflecting its traditional role as an inflation hedge during uncertain times, while the VIX remains elevated in the upper-20s.

Interestingly, most global equity markets are actually up since the risk-off transition began, suggesting a U.S.-specific outflow as foreign investors repatriate capital amidst dollar weakness. This capital flight highlights the precarious position of America's stretched fiscal situation and the market's growing skepticism about near-term economic prospects.

Medium Term: Global Refinancing is 2025’s Biggest Risk

The "global debt refinancing air pocket" represents 2025's biggest market risk. When global liquidity fails to keep pace with debt refinancing needs, markets correct – we've seen this pattern repeat since 2009:

• 2012: S&P -10%, Bitcoin -39%

• 2015-16: S&P -14%, Bitcoin -42%

• 2018: S&P -20%, Bitcoin -83%

• 2022: S&P -25%, Bitcoin -77%

Current global liquidity metrics show concerning weakness, expanding only 1-2% on both month-over-month and three-month annualized bases. This is dramatically insufficient compared to the 20-30% expansion rates that supported previous refinancing cycles during 2020-2021.

Wall Street estimates economic growth bottoming in Q1, yet President Trump and Treasury Secretary Bessent consistently signal a "6-12 month" timeline. This disconnect suggests a deliberate strategy to pressure the Fed into more accommodative policy by letting economic data deteriorate further.

Long-Term: Secular Inflation & The Fed’s Role

Bitcoin's remarkable performance since March 2020 reflects a fundamental reality: fiscal dominance leads to monetary debasement and secular inflation. This trend remains firmly intact.

While February's headline inflation appeared tame (annual headline 2.8%, core 3.1%), the 3-month trend shows inflation persistently above pre-COVID levels. The data suggests a new equilibrium around 2.7-3.3% – well above the Fed's 2% target.

The Federal Reserve historically doesn't lead markets – it follows them. They'll likely accelerate rate cuts once growth sufficiently slows, pivoting from tightening to easing. Bitcoin, being the asset most sensitive to liquidity changes, should mark its cycle bottom at this inflection point and outperform into year-end.

This boom-bust cycle is compressing as political pressures drive increasingly aggressive intervention – creating both volatility and opportunity for prepared investors.

TLDR: Bitcoin’s Rollercoaster Path

• 1Q-2Q 2025: Risk-off environment persists; Bitcoin vulnerable to liquidity constraints

• 3Q 2025: Market bottoms as economic slowdown forces Fed accommodation

• 2H 2025: Markets recover as liquidity returns; Bitcoin leads the rally

• 2026: Inflation resurfaces, blamed on anything else besides monetary policy

DCA Model Signals: Maintain Minimal Exposure During Negative Momentum