I posted a month or so ago about the Dollar appearing to have bottomed — will come back to this during this article, you can read it here, i also wrote in the early days to this month ‘riding the edge’ pointing to a issue within the collateral base that essentially provides the liquidity (hypothecation) and how this will have material impact on Crypto, i also much earlier composed the following article about Henrik Zeberg and the Business/Liquidity Cycle, and how Catena was trapped either-way due to devices breaking down, ironically i finally got access to the system(s) and company last Saturday, hours before the plunge, at the time, it was already too late, and appeared that we were within the bounds of where the expected bottom would be.
Based on the data at the time, the momentum and earlier declines in Global Liquidity were playing out and their impact within the Risk Space, though Sunday (weak liquidity) and initial refusal (still ongoing) for the US to release employment data, alongside a liquidity shortfall (US Side) but also Globally started to manifest itself within the markets, over the early week we were learning Arthur Hayes was liquidating some of his shitcoins (at loss, at profit, didn’t matter) at first glance, it was sub 5m$ — not a sizable sum, and something that usually i’d ignore, i mean Arthur has liquidated at the bottom a few times so it wasn’t new, then he dropped his substack ‘Snow Forecast’ — A quick glance, showed he was of the belief that 1 Trillion $ was missing (evaporated), I thought to myself that’s a bit weird, our data is weekly, from Crossborder though not perfect due to revisions, we also are aware, liquidity drawdowns weekly are kind of irrelevant as long as the MOVE index isn’t markedly moving as it works through the system, and over the course of weeks, usually we are edging higher, then there was a revision in the Global Liquidity (excluding Shadow Monetary Base side) from 188 Trillion to 185 Trillion, this is sizable, a 1% move in Global Liquidity = 15% move (approx) in BTC.
By this point the markets were in free-fall 126,000$ → 89,000$ a gnarly amount, and truly something that shows, whilst the stock market is hitting all time highs, that there is some form of credit issue in the international plumbing.
The MOVE index which impacts collateral bases in hypothecation processes which essentially provides/removes liquidity had a V-Shape bottom, and it’s rounding on the top-bottom indicator.
Which would say we are due a period, of collateral based trust issues, but ironically is generally looking at it, the time to get long (in-context of volatility —downside, followed by a rampage in the market to a peak).
This market has been long-in-the-tooth, we’ve been in it since June 2022, it’s now mentally tiring i.e specifically in late (Sep 2024) I informed those close to me, that it would be prudent to exit the markets in December 2024 as this would / should be the exit, Trump naturally won and although the Administration commenced immediately to start injecting forms of Liquidity that the Biden Admin had commenced withdrawing in Sep 2024 completing in early Jan 2024 — some 6 Trillion $ it meant there would be a drawdown, Trumps aspirations naturally enticed the market to speculate, and well, it eventually hit in Feb-May 110,000$ → 74,000$ another gnarly run.
Trump had already commenced re-shoring liquidity, and the tariffs essentially stopped the market peaking (as it should have in Q4 2024 / Q1 2025) the following chart is the ISM (US Manufacturing PMI) — a barometer for the US Economy, which essentially means the Global Economy, Trump has ‘purposely’ wreaked havoc in the markets-global-economy, as he was inheriting a economy which was about to enter its blow off top, as a manner of speaking, Harris would have inherited a recession, but team blue would be in power for 4 yrs… and she could blame it on the demented lemon that was in power for the prior 4 yrs…
There’s two important aspects of the chart above… top one is the US ISM, historically the peaks in the ISM since 1988 have been around the 60’s, prior to 1988 they were around the 70’s this was the US being more productive, more kids, and well the 80’s all that changed (see my articles on UK, Thailand as examples, the same applies to the US — and as you’d see in CT there’s quite a few schools of thought, one we’re in the early innings of a business Cycle (Raoul Pal et al), or in the late stages of a business cycle (Henrik Zeberg et all), or you can look at the chart above (top part) and we’ve been in Recessionary conditions in the US for 2 + yrs, but notice the bottom chart (Top-Gauge Oscillator) that’s in the 70’s a few times, where as Trump has whipsawed it back with his rhetoric, bringing it to the 40’s/50’s —> now consider if you will the ISM used to peak in the 70’s then productivity declined, then it started peaking in the late 50’s → 60’s range, and since covid stimmie period it’s been essentially around the 50’s yet the oscillator is pointing to it being in the peak zone… we’ve had a regime change if i trust my gut, the system has changed…
I am going to go on a school of thought, that both Henrik and Raoul are right, because the data shows this… and i suspect the peak zones and recessionary zones perhaps will be changing, the chart below provides an insight from 1948 onwards, notice the volatility prior 1981 this likely was a data capture issue.
Adoption of AI and its impact is incalculable at this time (trackable), boomers finally retiring, digital economy, mass deportations, something says to me the business cycle is changing much like it did in the late 1980’s.
Now, we don’t specifically trade the business cycle, i.e we don’t value invest (you loose value) we don’t invest in the ‘real-economy’ as you loose value… we invest in Debasement, we trade/live debasement, we need enough growth that when shit gets real (tightening, liquidity, variable inflation growth etc) our monetary debasement (inflation) growth allows us to loose some value (15/25%) whilst we wait for the next liquidity cycle to commence (bottom)
In simple terms (this chart avove from Capital Wars) which is out-dated (2022) but the best example, when liquidity bottoms (grey area) that’s when we go long, on what ever is the fastest adoptive asset thus the most speculative, when its reaching towards 80 from 60 that’s when we observe momentum as liquidity (debasement) is going to tighten as there’s fear of variable inflation growth due asset appreciation and goods/services increases, this is when we’re looking to get out of a position, knowing that on the way down, even sitting in currency or assets ($ for example) we should accept to loose 5-15% either in spending power (inflation) or assets having their underlying prop up (liquidity removed) — example 2021 → 2022 June a 25% in real / nominal spending power loss forced us back into the market.
This is something people that don’t have wealth management don’t quite grasp, even if you have ‘generational wealth’ i.e say you had 100m$ this gets debased annually by 12% pre-tax(s) in spending power and when there’s events like Covid, GFC, Asian Financial Crisis, et al in those periods you loose 15-25% spending power, so even if your digits are rising you are getting poorer due to compounded debasement.
Which is why I was forced back in to understand the plumbing changes in 2022… best depicted in this clip my feelings.
Debasement is ‘soft-defaulting-debts’ and as you are probably aware debts are rarely if ever settled, they are refinanced and over years these become cheaper to service as long as the economy is growing… looking above as you can see the ISM chart, generationally the economy is declining, and debasement is rising as we’re now having issues not just with the debts but the interest, hence Debt/GDP is irrelevant for a stable economy, whereas Debt/Liquidity is paramount, when there’s not enough liquidity (debasement) = higher prices for assets for the plebeians then the entire system collapses and for the West this would be akin to the dark ages…
Trump has tried to re-balance this concentrating on Main Street —> these are the people that work in the economy but do not build the economy (non-innovators, entrepreneurs) but white collar workers, management, industrial/agricultural etc problem is the US, Western economy is driven by Debasement, we add liquidity (add assets to the Central Banks Balance Sheets) this creates confidence in the hypothecation markets where commerce happens as the asset is on the Balance Sheet of the Central Bank prodding parties to trust the underlying asset as collateral, price a hair cut based on volatility expectations and generate credit, which is invested, speculated, or put to work, which in return creates the economy, where banks feel they can lend into, this then generates asset appreciation and taxes in the form of productivity capture, and this in return allows monetary generation for the states to refinance their debt into, the process takes years to flow through the system(s) — alas even though Global Liquidity is rising it hasn’t risen enough, and the US as just one example needs to roll circa 10 Trillion $ of debt, and well as you can see above debt/liquidity is paramount, and there’s not enough liquidity, you can see the outcome of events that occurred before where there was a shortfall above.
Naturally the answer is more open QE (Quantitive Easing) and YCC (Yield Curve Control) but the road between is gnarly… you are starting to feel that now because the Fed is behind the curve (fearful of Powells Legacy? Trumps unwillingness to crush his base before mid-terms?).
I’ve openly stated a few times, additionally as I pointed out above the clip is a good representation of me in 2022, and more recently — I specifically don’t enjoy finance, I specifically don’t enjoy being around greed and am rather loathsome of the burden of coming to understand ‘true economics’, so as such I am trapped by the changes in the US, which impact the Global Economy, and likewise until the mean reversion occurs I am stuck in this ‘game’, the problem is there’s a few glaringly obvious questions, mainly about the business cycle which impacts risk assets, when plebes have funds they spend, they speculate, this drives asset prices, when they don’t they therefore don’t, we’ve been in a period where the ‘has’ cohort has done well, whereas the ‘has-not’ hasn’t done so well… technically speaking the has-not’s will overtime continue to do less well, this is baked in (debasement = debt refinancing) but as the majority, they elect the politicians that do this to them for the candy they are given (optical as it is) so it’s technically their fault, and their responsibility to shoulder, the has-so’s just recognize that they have to protect what they have so invest, some outpacing debasement the majority at least optically feeling wealthier.
Its a tedious game to partake in, and when I come back to the ISM representing the US Business Cycle, i can’t but help something is changing…
I am just unsure what way… If you are in the Raoul camp you think the Business Cycle is just bottoming, if you are in the Henrik camp, you think the Business Cycle is ending….
As I showed above, regimes change through generations… and arguably we were close to ending the business cycle as far as the oscillator was reading regardless of the value, then Trump starved it twice by strangling it with chaos…
If you do various regression analysis you can also see some interesting things…
Polynomial regression - https://en.wikipedia.org/wiki/Polynomial_regression has us in a rising cycle.
Rolling Regression - https://en.wikipedia.org/wiki/Rolling_recession has us in a recession worse than Covid and close to GFC era.
Regression on Maxima -https://www.researchgate.net/publication/349424091_Regression-type_analysis_for_block_maxima_on_block_maxima has the Business Cycle trending down over time, confirming above eye-ball perception.
I am therefore leaning (now) to the Henrik camp (in-part) I think the business cycle as I said the Global Liquidity Cycle was ending in September 2024 (sharply down and momentum rising) which was offset by Trump/Bessent reversing some of it once in office, commencing a new cycle, problem is that was the liquidity side, his tariff tantrums and general chaos was all about cooling the business cycle, so they could defer it into the mid-terms, think of it as two leavers, one leads the other, its like watching a twin engine yacht having reverse pulled on one and forward on the other — zig/zag absolute chaos bringing the ship to a halt.
Which is why you don’t see a business cycle like this ‘normally’ its been a whipsaw, but this is to not say the end is in just that I am leaning more towards the idea that we were peaking as per this…
We’ve since been pulled back and now do something like the late 80’s early 90’s like this, rapid rise with a low overheating period, then collapse into a QE injection akin to 2020… because they can’t allow a ‘proper recession’ and asset deflation as thats the collateral base for the world wide, and western world hegemony.
Which brings me to Techdev’s recent article his belief that the economy is coming out of the bottom would be equivalent to spring transitioning to summer, winter long behind but also not far in the future.
which in return with the liquidity cycle, the impact of actions that have now quite sometime ago occurred, and the business cycle coupled with Trump/Bessent actions leads to his thinking of a Trunk like growth (amazon post .com crash) which is rather gnarly.
Bitcoin is impacted by gold (feedback loop) playing out currently
But with liquidity not flowing and US / Western sanctions forcing adoption alongside being used as a tool in China to debase their debt, Bitcoin/Crypto is proving to be the slower horse (underperforming) against Gold, in-fact one could argue Gold has clearly won the current race (cycle). i.e Bitcoin firmly rejected and retested and rejected in its BTC/Gold chart.
Therefore with a business cycle that looked ‘starved of air’ purposely by the administration which they are now attempting to resuscitate into the mid-terms, Liquidity (Global) rising (crawling) even with a latest reading of 500b less (this week) and slowing momentum, alongside the US attempt to not provide liquidity (wall-street benefit, main-street feels) i’d hazard that until proximity to the mid-terms where they will undoubtably create a method (new) to flood the system with liquidity to starve off a catastrophe (debt refinancing - debt/liquidity ratio creating a national security risk) we may be somewhat approaching a peak, but due to the nature overall the peak will be short-lived but brutal, more brutal than Oct to today… but in the middle of that, we’ll have some time to benefit.
Which is why i am leaning towards Henrik short-term but not agreeing with his argument that BTC will be sub 4k, though i am careful to recognize BTC/Gold ratio shows BTC for now at least is the wrong horse… well, nor right now, but the past year…
Which brings me to the following from the Raoul camp - 150,000$ range, Henrik has 140,000$ range our system(s) had 171,000$ range for blow off top, but 140,000$ range against Global Liquidity, Tech Dev has 110,000$ range OR 150,000$ range dependent on whether you think the 85,000$ was hit this past week.. or proximity to, Arthur Hayes has 85,000$ then 250,000$ but also claims for 1.2m$
Reality being liquidity rising yes, not US side, China side declining, EU rising but going into the Economy not the markets, Frances debt might change that (or disintegrate the Union), still momentum declining and the business cycle looking to have peaked but pull back with a choke hold before it overheated, now being let-loose (revived) this all reads to me as a highly risky period…
It also means therefore i’d be suggesting cash in gains 108-140,000$ holding some BTC in-case incorrect (if holding), altcoins lag BTC but might actually move first — depending on the economy 6.5k ETH - 8.7k and shitcoins just exit on the pumps, consolidate, i’d hazard holding a % just drawing down operational capital and injections, and seeing what occurs, if as suspected it peaks then when it gets ‘gnarly’ they will be forced to intervene and that’s the time to re-enter and just sit in for a number of years…
All roads lead to debasement, its just how the ride is felt, sightseeing can be fun or it can be miserable.
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