President Donald Trump has taken bold steps to position the United States as the global leader in the cryptocurrency industry. One of his first acts was to sign a bill titled “Strengthening American Leadership in Digital Financial Technology,” which aims to promote monetary innovation while ensuring regulatory clarity in the crypto space. The bill outlines a protection regime for public blockchain networks, encourages the development of dollar-backed stablecoins, and explicitly prohibits the creation of a central bank digital currency (CBDC). To support this effort, a Digital Asset Markets Working Group, led by venture capitalist David Sacks, has been established to draft regulatory proposals. In addition to regulatory measures, Donald Trump has introduced a strategic initiative to create foreign exchange reserves in Bitcoin. This plan sees the US government hoarding Bitcoin, either through outright purchases or using cryptocurrencies seized from criminal enterprises. The reserves are intended to bolster the country’s financial position in a global economy increasingly influenced by digital assets. Trump has also repeatedly called for the US to assume the role of the “crypto capital of the world,” emphasizing the importance of fostering innovation and providing a clear regulatory environment to attract investment and generate innovation. And now, the only question is whether or not this is an asset class that will actually serve a purpose in the long term. As a result, should we simply wait for the poor investments in the space to mature—or, should crypto prove to be a big “nothing,” should we wait for the entire asset class to implode? Regardless of which of these two scenarios holds, it is pretty certain that one will come to pass. The only thing that fits is that for a brand new asset class, we will have an unprecedented, brand new market correction. There has been no asset in global financial history that has not overextended itself and ultimately caused major disruption on a planetary scale. Everything from real estate to metals to stocks has crashed at some point, and crypto will be no different. The only question is to what extent and when. It is a mathematical certainty that the market will eventually stop its upward cycle at some point due to positive real interest rates. 
Black: 1-year nominal fund, Red: Inflation rate (LTM), Blue: 1-year real interest rate Slowly, positive interest rates are slowing the economy and will eventually grind to a halt – the only question is how the stock market and prices will react. Stagflation seems to be the likely scenario – if we had to guess. All the speculation surrounding cryptocurrencies – and stocks – is complicated by the fact that Donald Trump now believes interest rates should be lower. Trump announced on Thursday (23/1) his intention to push for lower interest rates in the US, questioning the Federal Reserve’s tradition of political independence. Speaking at the World Economic Forum, he linked the need for interest rate cuts to lower oil prices, which he said would ease inflationary pressures. Whether or not this will have an impact on the policy that Fed Chairman Jerome Powell is expected to follow remains to be seen. 
His intention is to expand the asset bubble during his presidency and ensure that asset prices continue to rise under his presidency. This is all well and good, except that the Federal Reserve is in an unprecedented position, between a rock and a hard place. Inflation is still around 3%, nowhere near the Fed’s 2% target, and cutting rates now would almost guarantee that the Fed’s fight against rising prices will become more difficult. As you can see, inflation is once again hitting new highs: This is not a battle the Fed was going to win. The Fed would have to settle for a higher inflation target — and it probably will. The result may support the nominal value of financial assets a little longer, but unfortunately, the cost of living will also remain high for working-class Americans. This does not mean that the economy should lose credibility and spiral into a hyperinflationary spiral. It lets the “inflation genie” out of the bottle further. Beyond the gimmicks, nothing changes the fact that spending will have to be cut if the national debt is to be reduced, as Trump admits. The only way crypto helps us reduce the national debt is if we stake our claim on a bunch of bitcoin before it becomes a global trend and proves to be a good investment. Theoretically, other buyers in the market would then move the price higher, increasing the value of the bitcoins that have been used as a reserve currency. At some point, the US will buy the debt (or part of it) with bitcoins or act as collateral and use the profits to repay the debt—or at least part of it—if that is what President Trump really plans to do. No one is talking about the other scenario: what happens if other countries don’t follow the US lead and decide that the world is not going to adopt a standard. Then all that has happened is another bad investment. Meanwhile, the bond market continues to send signals that interest rates should be higher, not lower. At the same time, stocks are at all-time highs, pushing valuations to levels they’ve only touched once before—during the tech bubble of 2000. If we continue on this trajectory, the market will soon be the most overvalued it’s ever been. At some point, the stock market will believe it can reach the highest value stocks have ever had on Wall Street. Ultimately, that turns into a losing bet. We don’t know when, why, or how it’s going to happen, but it will happen. And make no mistake, we’re not cautiously heading into the next market correction. We’re hitting the gas pedal, and we’re seeing what comes next first, just hoping that through some kind of financial alchemy, everything will work itself out. 
On the positive side, the Trump administration appears to be making progress on foreign relations, both with allies and adversaries of the previous administration. Crucial to stabilizing the economy is achieving some kind of alignment with the rest of the world. Even if it boils down to the United States having to create some kind of “jubilee” debt (with forgiveness of… sins), we would need the rest of the world to buy that debt for what it is: defaulted debt. However, if we can get a buyout from the other side of the global financial corridor, there is a chance for four more years of perceived economic prosperity — and at least a momentary avoidance of utter chaos. In other words
- Trump battles bond market (and Fed) over interest rates
- Stocks, Cryptos and other assets… are the tail that wags the stock market dog
- Said… dog is nearing all-time highs in valuation
- Real interest rates are tightening the grip on the economy
- Spending cuts are needed to slow the national debt and return the economy to surpluses.
- Small gains are being made on the foreign policy front.
- The era of chaos is coming…
