Bitcoins’ Long-Term Strategic Integration 

Bitcoin Mid-Cycle

A glance at on-chain data confirms that Bitcoin is not at euphoric highs or bear market lows. It’s mid-cycle.

The metrics indicate that BTC is nowhere near the high levels evident historically before the bear market drawdowns.

Sovereign Wealth Funds

While retail investors and institutional asset managers are currently driving price discovery, there is increasing evidence that sovereign wealth funds are now joining the party.

Central banks prioritise liquidity and low volatility for the reserves that they may need to deploy during a crisis.

Sovereign wealth funds, however, are seeking long-term capital preservation and growth.

Bitcoin’s volatility, which makes it a poor candidate for central banks, is less of a barrier for wealth funds with a ten- or twenty-year investment horizon.

The asymmetric upside and growing liquidity of Bitcoin make it an increasingly viable strategic position. That is helped, in part, by the more positive regulatory framework that has become evident in the U.S. recently.

While it is not a full embrace of Bitcoin as a reserve asset, it represents a meaningful step toward the pivot from speculation to long-term strategic integration.

This trend will likely accelerate as trust in the current monetary system declines.

Debt To Rise

The total U.S. debt, encompassing both public and private debt, now exceeds $90 trillion. That will continue to grow as the fiscal largesse associated with the “Big, beautiful (tax) bill” and the shift in focus from Main Street to Wall Street plays out.

While that is unlikely to lead to a financial crisis in the short term, it will result in a continuation and acceleration of the K-shaped economy promoted by the Biden administration.

Those who benefit in a K-shaped economy will continue to benefit, and those on the wrong side of the K-shaped economy will be squeezed harder due to the debasement and loss of purchasing power driven by those deficits.

The upward direction of debt, both in the U.S. and globally, coupled with the loss of purchasing power associated with fiat currencies, will act as a tailwind for Bitcoin and could be a defining driver of the next phase.