Arthur Hayes' new article: The best investment under Trump's policy is to hold Bitcoin, and the bull market should buy on dips

Original title: Trump Truth

Original author: Arthur Hayes

Original translation: TechFlow

All opinions expressed in this article are the author's personal opinions and are for reference only. They do not constitute investment advice or any recommendation for trading behavior.

Four steps away from the wall, a wooden board is fixed vertically on a movable bracket. My yoga teacher asked me to align the heels of my hands with the intersection of the board and the bracket, and then bend over like a cat, making sure the back of my head is close to the board. If the position is correct, I can move my feet up the wall to form an L shape with the back of my head, back and sacrum on the board. To prevent my ribs from flaring out, I have to tighten my abdominal muscles and draw my tailbone in. Oops - I'm already sweating just holding this position. The real challenge, however, was yet to come: I had to kick one leg up to a completely vertical position while maintaining alignment.

The board was like a “mirror of truth” that would immediately expose problems with body alignment. If your alignment is off, you’ll immediately feel some part of your back or hips lifting off the board. As I lifted my left foot, with my right still against the wall, my musculoskeletal issues became immediately apparent: my left lat flared out, my left shoulder rolled in, and my entire body looked like a twisted ball of hair. I already knew about these problems because my athletic trainer and chiropractor had both discovered that my left back muscles were weaker than the right, causing my left shoulder to be higher and tilted forward. Practicing handstands on the board only made my imbalances more visible. There was no quick fix for these problems, only a slow, sometimes painful series of exercises that would slowly correct them.

If the board was a “mirror of truth” about my alignment, then President-elect Donald Trump was a “catalyst of truth” about the geopolitical and economic issues that were plaguing the world today. The global elite hates Trump precisely because he reveals certain truths. When I say "Trump truth" here, I don't mean that he will tell you personal information about himself, such as his height, net worth or golf scores. Rather, I mean that Trump reveals the true relationship between countries and what ordinary Americans really think when they are away from the pressure of political correctness.

As a macroeconomic analyst, I try to make predictions based on public data and current events to guide my investment portfolio. I appreciate "Trump truth" because it is a catalyst that forces leaders of various countries to face up to problems and take actions. These actions will eventually shape the future world order, and I hope to profit from them. Even before Trump officially took office, countries began to act in the way I predicted, which further strengthened my judgment on the future monetary policy and financial repression. This year-end article will analyze the major changes taking place inside and outside the four major economies of the United States, the European Union, China and Japan. In particular, I need to assess whether monetary policy will continue to be loose or even accelerate further after Trump officially takes office on January 20, 2025. This judgment is crucial to my short-term investment strategy.

However, I think the current cryptocurrency market has too high expectations that Trump can quickly change the status quo. In fact, Trump has few politically feasible quick solutions. The market may wake up around January 20, 2025 and realize that Trump has only one year at most to push any policy changes. This reality shock may trigger a sharp sell-off in cryptocurrencies and other "Trump 2.0" related assets.

Trump only has one year to act, because most US lawmakers will start campaigning for the November 2026 mid-term elections at the end of 2025. At that time, all seats in the House of Representatives and a large number of Senate seats will need to be re-elected. The Republican Party currently has a very weak majority in Congress, and they are likely to lose control after November 2026. The anger of the American people is understandable, but it will take even the most capable politicians more than a decade, not just one year, to solve those deep-seated domestic and foreign problems. Therefore, many investors may face serious "buyer's regret". Still, can money printing and financial repression against savers drive a sustained crypto boom into 2025 and beyond? I believe the answer is yes, but this post is also a way for me to try to convince myself of this possibility.

Monetary Phase Changes

I will borrow Russell Napier’s ideas to simplify the timeline of monetary structure after World War II.

· 1944 – 1971: Bretton Woods System

Countries fixed their currency exchange rates to the US dollar, which was pegged to gold at $35 per ounce.

· 1971 – 1994: Petrodollar System

With US President Nixon’s announcement of abandoning the gold standard, the US dollar began to float freely against other currencies. This shift was due to the US’ inability to maintain the gold peg, expand the welfare state, and finance the Vietnam War at the same time. Nixon reached an agreement with Saudi Arabia and other Persian Gulf oil producers that required them to price oil in dollars, pump as much oil as required, and recycle trade surpluses into U.S. financial assets. If you believe some reports, the U.S. manipulated some Gulf countries to raise oil prices in order to support this new monetary structure.

· 1994 – 2024: The Petro-Yuan System

China devalued its currency sharply in 1994 to combat inflation, a banking crisis, and a downturn in its export sector. At the same time, China and other Asian economies adopted mercantilist policies to accumulate dollar reserves through cheap exports to pay for energy and high-end manufactured goods imports. This policy not only promoted globalization, but also brought a billion low-wage workers into the international market, suppressed inflation in developed countries, and enabled Western central banks to maintain low interest rate policies for a long time.

The white line represents the USD/CNY exchange rate (USDCNY), and the yellow line represents Chinese GDP in constant USD.

2024 – Today?

I have not yet named the system that is emerging. However, Trump’s election is the catalyst for changes in the global monetary system. To be clear, Trump is not the root cause of this realignment; rather, he is outspoken about the imbalances that need to change and is willing to adopt highly disruptive policies to quickly push through changes that he believes are best for Americans. These changes will end the petro-yuan system. As I have argued in this article, these changes will lead to an increase in the supply of fiat money worldwide and an increase in financial repression. Both of these must happen because leaders, whether in the United States, the European Union, China, or Japan, are unwilling to deleverage to achieve a new sustainable equilibrium. Instead, they will choose to print money and destroy the real purchasing power of long-term government bonds and bank savings deposits to ensure the elite’s control in the new system.

Next, I will start with an overview of Trump’s goals and then assess the responses of various economies or countries.

The Truth About Trump

In order to maintain the petro-yuan system, the United States must run deficits in both the current account and the trade account. This result has led to the deindustrialization and financialization of the US economy. If you want to understand the mechanisms, I recommend reading all of Michael Pettis’s work. I’m not saying this is why the world should change its economic system, but the average white American male who has served the so-called “Pax Americana” has clearly lost a lot since the 1970s. The key here is the word “ordinary”; I’m not talking about high-level people like JP Morgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon, nor the ordinary white-collar workers who work for them. I’m talking about the average person who once had a job at Bethlehem Steel, his own house and a partner, and now the only women he interacts with may be the nurses at the methadone clinic. This is obvious because this group is slowly killing themselves with alcohol and prescription drugs. Compared to the high living standards and job satisfaction they once enjoyed after World War II, things are clearly awful now. It is no secret that this is Trump’s base, and he speaks to them in a way that no other politician dares. Trump promises to bring industry back to the United States and inject meaning back into their miserable lives.

For those bloodthirsty Americans who love “video game wars” (a very powerful political group), the current state of the US military is a disgrace. The myth of the superiority of the US military over any near or real adversary (currently only Russia and China meet this condition) originated from the fact that the US military “liberated” the world from Hitler’s aggression in World War II. But this was not the case; it took tens of millions of Soviet lives to defeat the Germans, and the US was just a finishing touch. Stalin despaired at the US delay in launching a major offensive against Hitler in the battlefields of Western Europe. US President Roosevelt let the Soviet Union bleed to reduce the casualties of American soldiers. Although the United States defeated Japan in the Pacific, they never faced a full-scale attack by the Japanese Army because Japan had committed most of its forces to mainland China. Instead of mythologizing the Normandy Landing in movies, Hollywood should have portrayed the Battle of Stalingrad and the heroism of General Zhukov and the millions of Russian soldiers who died.

After World War II, the U.S. military fought North Korea to a draw in the Korean War, lost to North Vietnam in the Vietnam War, underwent a chaotic withdrawal in Afghanistan in 2021, and is now losing to Russia in Ukraine. The only thing the U.S. military can be proud of is the use of highly complex and overly expensive weapons against third world countries such as Iraq in the two Persian Gulf Wars.

Success in war is a reflection of industrial economic strength. If you care about war, the U.S. economy is actually "false prosperity". Yes, Americans can make unparalleled leveraged buyouts, but their weapon systems are a patchwork of imported Chinese parts, which are sold at high prices to "kidnapped customers" like Saudi Arabia, who must buy these systems under geopolitical agreements. And Russia, whose economy is only one-tenth the size of the U.S., can produce unstoppable hypersonic missiles at a cost far lower than that of U.S. conventional weapons.

Trump is not a "peace first" hippie; he fully believes in American military superiority and exceptionalism, and is happy to use this military power to slaughter enemies. Remember that during his first term, he assassinated Iranian General Qasem Soleimani on Iraqi soil, an act that delighted many Americans. Trump, without a care in the world to violate Iraqi airspace and ignore the fact that the United States was not officially at war with Iran, unilaterally decided to assassinate another country's general. Therefore, he wants to rearm the empire so that its military capabilities match the propaganda.

Trump advocates reinvigorating the US economy through re-industrialization, which will not only help those who want to have good manufacturing jobs, but also support those who want a strong military. To do this, it is necessary to reverse the imbalances that have developed under the petro-yuan system. This will be achieved by weakening the dollar, providing tax subsidies and production subsidies, and relaxing regulations. All of these measures will make it economically viable for companies to move production back to the United States, because China is still the best place to produce, thanks to three decades of pro-growth policies.

In my article Black or White, I talked about how quantitative easing (QE) for the poor could help finance the reindustrialization of the United States. I believe that incoming US Treasury Secretary Bessant will pursue such an industrial policy. However, this will take time, and Trump needs to show immediate results that will appeal to voters as progress in his first year in office. Therefore, I believe Trump and Bessant must immediately devalue the dollar. I want to discuss how this is possible and why it must happen in the first half of 2025.

Bitcoin Strategic Reserve

"Gold is money, everything else is just credit." - J.P. Morgan

Trump and Bessent have repeatedly stressed that it is necessary to weaken the dollar in order to achieve the United States' economic goals. So, what should the dollar depreciate against? And when should it be done?

Among the world's major exporters, in addition to the United States, are China (RMB), the European Union (Euro), the United Kingdom (Pound Sterling) and Japan (Yen). If you want to attract more companies to move production back to the United States, the dollar must depreciate against these currencies. Companies do not necessarily need to be registered in the United States; Trump also accepts Chinese manufacturers setting up factories in the United States and selling goods locally. But the key is that American consumers must buy "Made in the United States" products.

The past way of adjusting exchange rates through international coordination is outdated. Today, the United States is not as powerful as it was in the 1980s, both economically and militarily. Therefore, Bessent cannot unilaterally ask other countries to adjust the exchange rate of their currencies against the dollar. Of course, he could use tariffs or other means to exert pressure, but this would take a lot of time and diplomatic efforts. In fact, there is a more direct way.

The United States currently has the largest gold reserves in the world, about 8,133.46 tons, which provides a unique advantage for achieving a devaluation of the dollar. As we all know, gold is the real currency of global trade. Although the United States has been off the gold standard for 50 years, historically, the gold standard has always been the mainstream, and the current fiat currency system is the exception. Therefore, the simplest path is to devalue the dollar relative to gold.

Currently, the U.S. Treasury prices gold at $42.22 per ounce on its balance sheet. If Bessant can convince Congress to increase the legal price of gold, the devaluation of the dollar relative to gold will directly increase the credit line of the Treasury's account at the Federal Reserve. These additional funds can be used directly for economic spending. Every increase in the price of gold by $3,824 per ounce can bring an additional $1 trillion to the Treasury. For example, adjusting the price of gold to the current spot price would add about $695 billion to the fiscal reserves.

In this way, the US government can create dollars "out of thin air" by adjusting the price of gold and use them to purchase goods and services. This operation is essentially a devaluation of fiat currencies. Since the value of other fiat currencies is also implicitly linked to gold, these currencies will automatically appreciate relative to the dollar. The United States can quickly achieve a significant devaluation of the dollar against the currencies of its major trading partners without consulting other countries.

One might ask, will other exporting countries restore their competitiveness by devaluing their currencies more against gold? In theory, they can, but due to the global reserve currency status of the dollar, these countries cannot follow the US gold devaluation strategy or they will face the risk of hyperinflation. Especially because these countries cannot achieve self-sufficiency in energy and food like the United States, such inflation will lead to severe social unrest, thus threatening the position of the ruling party.

How much of a devaluation of the dollar would be needed to reindustrialize the U.S. economy? The answer is a new gold price. If I were Bessent, I would take a bold move, such as revaluing gold to $10,000-20,000 an ounce. According to Luke Gromen's calculations, if we return to the ratio of gold to Fed liabilities in the 1980s, the price of gold may need to rise 14 times to about $40,000 an ounce. This is not my prediction, but it illustrates how overvalued the dollar is relative to gold.

As a gold supporter, I own physical gold bars and invest in gold mining ETFs because the easiest way for the dollar to devalue is relative to gold. This move will also have a profound impact on the cryptocurrency market.

The concept of the Bitcoin Strategic Reserve (BSR) is based on this logic. U.S. Senator Lummis has proposed legislation that would require the Treasury to purchase 200,000 bitcoins per year for five years and finance these purchases by increasing the price of gold on the government's balance sheet. The core of this proposal is that Bitcoin, as the "hardest currency," can help the United States maintain its financial dominance in both the digital and real economies.

If the government's economic policy is closely tied to the price of Bitcoin, it will be more inclined to support the expansion of the Bitcoin and cryptocurrency ecosystems. This logic is similar to the way the government supports domestic gold mining and gold trading markets. For example, China encourages domestic gold holdings through the Shanghai Gold Futures Exchange, which is a policy practice to increase the country's gold reserves.

If the U.S. government creates more dollars through the devaluation of gold and uses part of the funds to buy Bitcoin, the fiat currency price of Bitcoin will rise accordingly. This rise will further trigger competitive sovereign purchases by other countries as they need to catch up with the United States. In this case, the price of Bitcoin may grow exponentially. After all, who would be willing to sell Bitcoin in exchange for devalued fiat currency in the context of the government's active devaluation of fiat currency? Of course, long-term holders will eventually sell their Bitcoin at some price point, but that price will definitely not be $100,000. Despite this clear and reasonable logic, I still don't think the Bitcoin Strategic Reserve (BSR) will actually be implemented. I think politicians are more inclined to use the newly created dollars for livelihood projects to ensure their victory in the upcoming election. However, even if the BSR does not happen, the mere possibility is enough to generate buying pressure in the market.

Although I don't think the US government will buy Bitcoin, it does not affect my optimistic expectations for Bitcoin prices. The depreciation of gold will create a large number of new dollars, which will eventually flow into real goods, services, and financial assets. Based on historical experience, the price of Bitcoin has increased much faster than the global supply of US dollars, because the total amount of Bitcoin is limited and the circulation is gradually decreasing.

The white line in the figure is the Fed's balance sheet, and the yellow line is the Bitcoin price, both of which are based on the index value of 100 on January 1, 2011. The Fed's balance sheet has increased by 2.83 times, while the Bitcoin price has increased by 317,500 times.

In summary, a rapid and significant weakening of the dollar is the first step for Trump and Bessent to achieve their economic goals. This measure can be completed quickly without consulting domestic lawmakers or foreign finance departments. Considering that Trump needs to show results within a year to help the Republicans maintain control of the House and Senate, I expect the depreciation of the dollar/gold to take place in the first half of 2025.

Next, let's focus on China and explore how they will respond to Trump's core policies.

China's Response

China is currently facing two major challenges, and Trump's policies have undoubtedly increased these challenges, because the United States also needs to create higher-paying jobs for ordinary people and increase investment in production capacity. Trump and his team's main weapons are a weak dollar and tariffs, so what are China's responses?

I think China has made it clear that it must accept quantitative easing (QE) ideologically and further allow the RMB to float freely. So far, China has done little fiscal stimulus through central bank printing, mainly to avoid exacerbating domestic economic imbalances. In addition, China has been on the sidelines, waiting for the policy direction of the new US administration. However, signs in recent weeks indicate that China will conduct large-scale economic stimulus through traditional QE channels and allow the RMB to trade freely according to market demand.

As for the question of why QE will lead to a depreciation of the RMB, it can be understood from the following logic: QE increases the supply of RMB. If the growth rate of RMB supply exceeds that of other currencies, then the RMB will naturally depreciate relative to these currencies. In addition, RMB holders may act in advance to convert RMB into fixed-supply assets such as Bitcoin, gold or U.S. stocks to protect their purchasing power. This behavior will also further exacerbate the depreciation of the RMB.

The picture shows the trend of investors starting to withdraw funds from China.

"With Trump returning to the White House, China's top leaders and policymakers are considering allowing the yuan to depreciate further in 2025 to cope with higher U.S. trade tariffs."-Reuters, December 11, 2024

The PBOC has not made clear the real reason why it is allowing the RMB to float freely, which may be to avoid further exacerbating capital outflows. If the wealthy class is told directly that the PBOC's policy will focus on printing money and buying government bonds, it may cause panic among investors and lead to rapid capital flight. The funds may flow into Hong Kong first and then move to other parts of the world. Therefore, the PBOC prefers to guide investors to invest their funds in domestic stock and real estate markets rather than moving them overseas by hinting at them.

As I predicted in my article Let's Go Bitcoin, the People's Bank of China (PBOC) will curb deflation through large-scale quantitative easing (QE) and monetary stimulus policies. We can judge the effectiveness of these policies by observing whether the yields of Chinese government bonds (CGBs) rise. Currently, the yields of CGBs are at historical lows as investors prefer to choose government bonds with principal protection rather than risk investing in volatile stock and real estate markets. This choice reflects the market's pessimism about China's medium-term economic prospects. It is not complicated to reverse this sentiment: just print money on a large scale and buy back government bonds from investors through the central bank's open market operations. This is the definition of quantitative easing. For a detailed description of this process, please refer to my chart analysis in Black and White .

From a macro perspective, the main problem with printing money is the external value of the RMB. While a strong RMB has some benefits, such as making it cheaper for Chinese consumers to buy imported goods, increasing the likelihood that trading partners will use RMB settlements, and helping companies borrow RMB at lower interest rates, these benefits are insignificant under Trump's policy pressure. The United States can print money more boldly than China without causing hyperinflation, as Trump and Bessant have shown. Therefore, the RMB exchange rate against the US dollar is likely to float, which in the short term means that the RMB will depreciate.

Before Bessant pushes for a sharp devaluation of the dollar against gold, a weaker yuan will help Chinese manufacturers export more goods. This short-term advantage will help China negotiate more favorable terms with the Trump team, such as easier access to the U.S. market for Chinese companies.

The important question for cryptocurrency investors is: How will Chinese investors react to signals of an increase in the supply of yuan? Will legal capital outflow channels such as Macau's gaming and Hong Kong's businesses be allowed to continue operating, or will they be closed to limit capital flight? Given that the United States is restricting certain funds (such as Texas public university endowment funds) from investing in Chinese assets, China may also take similar measures to prevent newly printed yuan from flowing to the United States through Hong Kong. These yuan must be directed to China's own stock and real estate markets. Therefore, capital outflows from the yuan to the dollar may accelerate before the policy window closes.

For the cryptocurrency market, in the short term, Chinese capital may flow through Hong Kong to the U.S. dollar and buy Bitcoin and other cryptocurrencies. In the medium term, once the Chinese government prohibits the transfer of capital overseas through obvious channels, the question will become whether Hong Kong's cryptocurrency ETFs will be allowed to accept funds from mainland China. If controlling cryptocurrencies through Hong Kong's state-owned asset management companies can enhance China's competitiveness, or at least put China on par with the United States in the crypto field, then Hong Kong's cryptocurrency ETFs will quickly attract a lot of money. This will bring new impetus to the cryptocurrency market because these ETFs will need to buy spot cryptocurrencies in the global market.

Japan: The Choice of the Setting Sun

While Japan's political elites are proud of their culture and history, they still rely heavily on the support of the United States. After World War II, Japan quickly rebuilt with the help of U.S. dollar loans and tariff-free access to the U.S. market and became the world's second largest economy in the early 1990s. At the same time, Japan has also built the most ski resorts in the world, which is essential to my lifestyle.

However, just as in the 1980s, trade and financial imbalances between Japan and the United States are once again in the spotlight. The currency agreement at the time led to a weaker dollar and a stronger yen, which eventually triggered the collapse of the bubble in Japan's stock and real estate markets in 1989. In order to strengthen the yen, the Bank of Japan had to tighten monetary policy, which directly led to the collapse of the bubble. It also shows that loose monetary policy often inflates asset bubbles, which will burst once the policy is tightened. Today, Japanese politicians may once again take similar "financial hara-kiri" actions to cater to the needs of the United States.

Currently, Japan is the largest holder of US Treasury bonds and has implemented an aggressive quantitative easing policy, which later developed into yield curve control (YCC), which has led to extremely weak USD/JPY exchange rate. I discuss the importance of the USD/JPY exchange rate in detail in Shikata Ga Nai and Spirited Away .

Trump’s economic strategy makes it clear that the dollar needs to appreciate relative to the yen. Trump and Bessant make it clear that this adjustment is imperative. Unlike China, Japan’s currency adjustment is not adversarial, but rather Bessant directly determines the USD/JPY exchange rate and Japan will be forced to comply.

However, the key problem for the yen to appreciate is that the Bank of Japan (BOJ) must raise interest rates. Without government intervention, the following may happen:

1. As interest rates rise, Japanese government bonds (JGBs) become more attractive, and Japanese companies, households, and pension funds may sell foreign assets (mainly US Treasuries and stocks), convert the resulting foreign currency into yen, and buy JGBs instead.

2. The rise in JGB yields means that its price falls, which will have a serious impact on the balance sheet of the Bank of Japan. In addition, the Bank of Japan holds a large amount of US Treasuries and stocks, and their prices may also fall as Japanese investors sell these assets to repatriate funds. At the same time, the Bank of Japan will also need to pay higher interest on yen bank reserves. These changes may eventually put the solvency of the Bank of Japan under great pressure.

Trump obviously does not want Japan's financial system to collapse. The U.S. naval bases in Japan are essential to curbing China's maritime expansion, and Japan's production of key products such as semiconductors also ensures that the United States can obtain a stable supply. Therefore, Trump may instruct Bessant to take all necessary measures to ensure Japan's financial stability. For example, Bessant may use the power of the U.S. Treasury to conduct a currency swap (CSWAP) between the U.S. dollar and the Japanese central bank to absorb the U.S. Treasury bonds and stocks sold by Japan in the off-market. The specific process of this mechanism can be referred to my description in the article Spirited Away :

· The Federal Reserve increases the supply of dollars in exchange for the yen previously generated by the growth of carry trades.

· In the currency swap, the Federal Reserve provides dollars to the Bank of Japan, and the Bank of Japan provides yen to the Federal Reserve.

· The Bank of Japan thus holds more US stocks and bonds, and as the supply of dollars increases, the prices of these assets will rise.

· The Bank of Japan holds more Japanese Government Bonds (JGBs).

This mechanism is critical to the cryptocurrency market because the supply of dollars will increase significantly to solve the problem of unwinding the yen-dollar carry trade. Although this process will unfold slowly, trillions of dollars may be printed to maintain the stability of the Japanese financial system.

Solving the trade and financial imbalances between Japan and the United States is not complicated, because Japan has little say in the matter. Japan’s political position is extremely fragile at the moment, with the ruling Liberal Democratic Party (LDP) losing its parliamentary majority, leaving the country’s governance in turmoil. Although Japan’s elites are filled with disgust at the US’s boorish behavior, they do not have the political strength to oppose Trump’s economic tactics.

EU: The Last Will Always Be Last

While many Europeans (at least those who are not named Muhammad) retain some Christian tradition, the biblical phrase “the last will be first” clearly does not apply to the EU economically. The last will always be last. For some reason, Europe’s elite politicians always seem willing to accept ruthless oppression from the United States.

In fact, Europe should do its best to strengthen cooperation with Russia and China. Russia can provide cheap energy through pipelines and provide Europe with abundant food supplies. China can provide high-quality, low-cost manufactured goods and is willing to buy European luxury goods in astonishing quantities. Yet the continent has been constrained by two island nations, Britain and the United States, rather than being integrated into a vast and unstoppable Eurasian sphere of shared prosperity.

The German and French economies are struggling because Europe refuses to buy cheap Russian gas, abandon its false promises of a green energy transition, or engage in mutually beneficial trade with China. The decline of Germany and France, the two engines of the European economy, has also made the entire continent look weaker, almost reduced to a holiday destination for Arabs, Russians (although perhaps less now) and Americans. All this is ironic, because European elites often have deep prejudices against the people of these regions.

This year, two key speeches were delivered by Super Mario Draghi (The Future of European Competitiveness, September 2024) and Emmanuel Macron (Europe, April 2024). For Europeans, these speeches were frustrating because, while the two politicians accurately pointed out the core problems facing Europe - high energy costs and insufficient domestic investment - their solutions boiled down to "financing the green energy transition by printing more money and taking more financial repression measures."

In fact, a more effective solution would be to abandon blind support for US policies, reach a settlement with Russia to obtain cheap natural gas, develop nuclear energy, increase trade with China, and thoroughly deregulate financial markets. However, it is disappointing that, although many European voters have realized that the current policy mix is not in their interests and voted for parties that want to promote these changes, the elites in power still weaken the will of the majority through various undemocratic means. The current political turmoil continues, and both France and Germany are actually in a state of no stable ruling government.

Trump’s strategic intent is clear: the United States needs Europe to continue to distance itself from Russia, restrict trade with China, and buy American-made weapons to defend against Russia and China, thereby preventing the formation of a strong, integrated Eurasian economy. However, the negative impact of these policies on the European economy has forced the EU to rely on financial repression and massive money printing to stay afloat. I will quote some of Macron’s remarks to illustrate Europe’s future financial policies and explain why you should be worried if you hold capital in Europe. You need to be wary of the possibility that you may lose the freedom to move capital out of Europe in the future, and your retirement accounts or bank deposits may only be invested in poorly performing long-term EU government bonds.

Before quoting Macron, let’s take a look at a speech by Enrico Letta, former Italian Prime Minister and current president of the Jacques Delors Institute: “The EU has up to 33 trillion euros in private savings, of which 34.1% is deposited in current accounts. However, these funds are not fully utilized to meet the strategic needs of the EU. What is worrying is that a large amount of European capital flows to the US economy and US asset management companies every year. This phenomenon reflects the EU’s inefficiency in the use of savings. If these resources can be effectively redistributed within the EU’s internal economy, it will be able to significantly promote the realization of its strategic goals.” - Excerpted from "More Than a Market"

Letta’s point is very clear: European capital should not be used by American companies, but should serve Europe’s own development. EU authorities have a variety of means to force investors to invest their funds in poorly performing European assets. For example, for funds invested through pension or retirement accounts, EU regulators can stipulate a "suitable investment range" so that investment managers can only legally invest in EU stocks and bonds. As for money in bank accounts, regulators can prohibit banks from offering investment options in non-EU assets on the grounds that these options are "unsuitable" for depositors. Any money held in an EU-regulated financial institution may be subject to the control of policymakers like Christine Lagarde. As president of the European Central Bank (ECB), her first responsibility is to ensure the survival of the EU financial system, not to ensure that your savings outperform inflation.

If you thought that only the elite of the World Economic Forum in Davos support such policies, here is another quote from Marine Le Pen: "Europe must wake up... because the United States will defend its own interests more vigorously."

Trump's policies have caused strong reactions on both the left and right sides of the political spectrum in Europe.

Going back to the point that EU politicians refuse to take simpler, less economically destructive ways to solve problems, here is Macron speaking directly to ordinary people: "Yes, the days of Europe's dependence on Russia for energy and fertilizers, outsourcing production to China and relying on the United States for security are over."

Macron stressed that EU capital should not flow to the best-performing financial products, but should serve more to develop the European economy. He said: "The third problem is: every year, about 300 billion euros of our savings are used to finance the United States, whether it is to buy U.S. Treasury bonds or participate in venture capital. This is extremely absurd."

In addition, Macron proposed to suspend the Basel III banking regulatory rules. This move will allow banks to buy expensive, low-yielding EU government bonds with unlimited leverage, and investors holding euro assets will ultimately suffer because it means that the supply of euros will increase infinitely. He further pointed out: "Secondly, we need to review the application of Basel and Solvency. We can't be the only economy in the world that strictly abides by these rules. The United States, as the source of the 2008-2010 financial crisis, chose not to abide by these rules."

Macron believes that since the United States does not follow these global banking rules, Europe does not need to fully comply. But such a policy may trigger the collapse of the fiat currency system and accelerate the rise of Bitcoin and gold.

Draghi also mentioned in a recent report that in order to maintain a huge welfare system (for example, France's government spending accounts for 57% of GDP, ranking first among developed countries), the EU needs to invest an additional 800 billion euros each year. The source of this money will be the ECB's money printing operations, while forcing savers to buy long-term EU government bonds through financial repression.

I am not making this up. These contents come from direct statements from the left and right wings of the EU political spectrum. They claim to know best how to invest EU savings. They tell you that banks should be allowed to use unlimited leverage to buy bonds of EU member states, and eventually these bonds will be issued by the ECB after the launch of pan-Euro bonds. The reasoning behind this is the so-called "Trump strategic intention". If the United States under Trump weakens the dollar, suspends bank supervision, and forces Europe to cut ties with Russia and China, then EU savers must accept low returns and financial repression. The "compliers" of the EU need to sacrifice their capital and living standards to maintain the continuation of the EU project.

I’m sure you’ve noticed the obvious irony in this statement. But if you’re willing to lower your standard of living for “Europe™”, I don’t blame you. I bet many of you may be flying the EU flag in public, but in private you’re rushing to your computer, trying to find a way out of this mess as quickly as possible. You know, the way to escape is to buy Bitcoin before it’s banned and keep it yourself. But it’s up to you, EU readers.

Globally, as the circulation of the euro continues to increase and the EU's control over local capital becomes increasingly tight, the price of Bitcoin will continue to soar. This trend is actually an inevitable result of current policies. However, I believe that this will be a "say one thing, do another" situation. Those in power may quietly transfer assets to Switzerland or Liechtenstein and buy cryptocurrencies frantically. At the same time, ordinary people will suffer losses under state-sponsored inflation policies if they do not take action to protect their savings. This is the current helpless reality in Europe.

Crypto Truth Terminal

Our Truth Terminal is a crypto free market that operates 24/7. The rise of Bitcoin after Trump's victory in early November has become a leading indicator of the acceleration of the growth of the fiat money supply. Faced with the impact of "Trump's policies", every major economy or country must respond quickly, and the usual response is currency devaluation and increased financial repression.

Bitcoin (yellow line) is driving the growth of US bank credit (white line).

Does this mean that Bitcoin will go all the way to $1 million without any major pullback? Of course not.

I don’t think the market realizes that Trump actually has a very limited time to get things done. The market currently has too high expectations for Trump and his team to quickly achieve economic and political miracles. However, the problems that have led to Trump’s popularity have accumulated for decades and cannot be solved in a short period of time. No matter how Elon Musk promotes on the X platform, there is no instant solution. Therefore, it is almost impossible for Trump to fully meet the expectations of his supporters and prevent the Democrats from regaining control of the Senate and the House in 2026. People’s impatience stems from their desperation, and Trump, as a shrewd politician, knows this. To me, this means he has to make big moves early in his presidency, which is why I’m betting he’ll drive a big devaluation of the dollar against gold within his first 100 days. This is a simple way to quickly make U.S. production more competitive. With this policy, U.S. production capacity will be repatriated quickly, resulting in immediate job growth, rather than waiting for the effects to come five years from now.

Before this crypto bull market enters the “market bubble burst boom” phase, I expect the market to experience a sharp decline around Trump’s inauguration on January 20, 2025. The Maelstrom team plans to reduce some of its positions in advance and hopes to re-buy some core assets at lower prices in the first half of 2025. Of course, every trader says this and believes they can time the market accurately. But in most cases, they tend to sell too early and then lack the confidence to re-enter the market at higher prices, thus missing out on the main gains of the bull market. With this in mind, we pledged that if the bull market continued to be strong after January 20, we would quickly adjust our strategy, accept short-term losses, and re-enter the market.

Trump's policies have made me see the structural flaws of the global economic order, and have made me understand that the best way to maximize investment returns in the current environment is to hold Bitcoin and cryptocurrencies. Therefore, I will continue to buy on dips and rebounds to seize the opportunities of this bull market.

The future is here, the choice is yours.

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