- BitMEX says that sovereign debt markets are approaching a breaking point, and that the explosion will trigger a Bitcoin supercycle.
- Bitcoin ETFs hit a six-day outflow streak last week, and if this trend continues this week, they could dip into net outflows for the year.
The US debt crisis is approaching a breaking point, and this time, the government can no longer rely on hiking interest rates to fight inflation. The result will be a Bitcoin supercycle as investors flee to the only asset the government cannot manipulate, says crypto exchange BitMEX.
In its analysis, BitMEX noted that the 30-year US Treasury yield has surged past 5.14%, while others, like Japan’s ten-year JGB, is now at 2.8%. This is eliminating global liquidity and threatening the lifeblood of traditional finance.
The US has previously relied on rate hikes to contain similar crises and fight inflation. However, this time, that option is not available as the interest on its $39 trillion national debt would crush its budget.
The tech sector is adding another layer to the crisis. According to BitMEX, the AI sector has become an economic black hole; the top four AI spenders are on track to consume $725 billion this year.
The casualty of the chaos is the fiat currencies like the US dollar and the Japanese yen, says BitMEX, adding:
“Faced with an impossible choice, authorities will always choose to save the bond market and fund the state at the direct, deliberate expense of the purchasing power of their currencies.”
A Bitcoin Supercycle
BitMEX concedes that in the short-term, Bitcoin holders will be hard hit as traditional funds sell their liquid assets to cover their losses after bond yields spike. This will result in a sharp dip for all liquid and risk-on assets, and Bitcoin could take a huge hit.
However, in due time, the damage will be too serious, and the central banks “will be forced to quietly turn the money printers back on to save the system.”
BitMEX says:
“That is when the game completely flips. Money will desperately seek out assets that the government cannot print. With Wall Street ETFs draining supply, Bitcoin is the ultimate defence. It has zero debt risk and no single point of failure.”
This will be the beginning of the Bitcoin supercycle, BitMEX believes. The exchange implores investors not to panic-sell their BTC and to ‘aggressively’ buy the dips before the rest of the market wakes up to the unique qualities of Bitcoin as an asset the state cannot control.
The implosion discussed by BitMEX may already have started. Institutional investors have been exiting their Bitcoin ETF positions recently, with Friday last week marking the sixth consecutive day of outflows. The ETFs bled $105 million on Friday after losing $100 million on Thursday. Over the past 12 days, only two have recorded net inflows.
BTC trades at $77,360 at press time, gaining marginally over the past day as the rest of the market traded sideways.
