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I know many of the substack/macro community like to pile bitcoin, gold, silver, platinum into a dollar debasement trade. And intellectually that makes total sense. But for the past few years, I have thought GLD/TLT makes more sense (long gold / short treasuries). For me, this felt a much safer trade, than a straight out dollar debasement trade. GLD/TLT has been good, but I wont lie, the 25% drawdown earlier this year did make me nervous.

I know in the more “excitable” corners of substack they have been all in on other debasement trades like bitcoin, silver and even platinum. I generally avoided these assets, for one reason and one reason alone. I know People Bank of China buys gold, but I don’ think it buys any of those other assets. Silver and platinum are really poor alternatives to gold, and have traded as such, with gold outperforming over a long period of time. Gold was looking expensive versus silver earlier this year, but looks okay here.

Bitcoin is not being purchased by the PBOC, and in fact China has a hostile view on crypto. But Bitcoin is very popular in emerging markets, and so COULD do well in a weak dollar environment. So lets look at some of the indicators on Bitcoin. I look at shares outstanding on IBIT to gauge enthusiasm. Shares outstanding fell slightly in June, but hard to say that investors had completely given up on the trade. Short interest did rise somewhat in IBIT recently, but very small compared to outstanding.

The best days to buy bitcoin was when the market was very negative on it. A good proxy for this was Strategy short interest. Short interest remains at lows, and a quick check shows that cost of borrow remains GC.

I also have a view that the market cap of Tether was a good lead indicator on Bitcoin. When Tether market cap was rising, you knew money was coming into the crypto environment - which would be bullish for crypto assets. Tether market cap is actually falling.

Given the weakness in bitcoin this year, I would have assumed the trend following community would be short - but CFTC data actually shows record longs.

The most bullish thing about Bitcoin are the technicals. It has broken above its 200 MDA, which has usually been a good time to buy.

When I started writing this note, I thought the data would point to good risk reward. But it looks like everyone is long already. I don’t like that set up - at least with gold you have the PBOC as an anchor buyer.

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Capital Flows and Asset Markets

TIME FOR BITCOIN?