Why Bitcoin Just Became the Ultimate Safe Haven

Jordi Visser is a macro investor with over 30 years of Wall Street experience. He also writes a Substack called “VisserLabs” and puts out investing YouTube videos.

In this conversation we discuss what is going on with bitcoin, what went on during Crypto Week and legislation, how we should be thinking about inflation, AI arms race, and opportunities he is excited about.

In a rapidly changing global landscape, characterized by increasingly violent market movements due to less liquidity relative to asset size, Bitcoin is emerging as a significant player, despite being a relatively small $2 trillion asset . This shift is occurring amidst discussions on liquidity cycles, the independence of the Federal Reserve, recent developments in crypto legislation, and the accelerating AI arms race.

The Dynamics of Liquidity Cycles and Bitcoin’s Role

Unlike traditional credit cycles, current market fluctuations are described as liquidity cycles, which tend to be characterized by violent downturns followed by equally violent recoveries . In this environment, the ability of retail investors to move quickly, unburdened by institutional constraints or reputational concerns, has given them a distinct advantage over traditional hedge funds and asset managers who struggle to adapt to rapid changes . Bitcoin, being a smaller asset, is seen as a key component in this new dynamic, acting as a “hurdle rate” for investors who need assets that can move fast .

The Question of Fed Independence and Economic Policy

Significant pressure is mounting for Jerome Powell to resign from the Federal Reserve, stemming from various directions including the President, Bill Py, and the media . This situation highlights a broader debate about the independence of the Fed, which is increasingly being called into question . The administration faces a substantial national debt (over 100% of GDP) and a deficit, with a significant portion dedicated to interest expenses, necessitating lower interest rates even if it means tolerating slightly higher inflation (around 3.5%) . This suggests a move towards fiscal dominance, where the Fed’s actions are muted by the growing national debt and entitlements . The administration has also been observed using “trial balloons” to gauge market reactions to potential policy changes, such as the rumored firing of Jerome Powell or tariff pauses, before making formal announcements .

Regarding inflation, despite tariffs and rising commodity prices like copper and natural gas, inflation data has consistently come in lower than expected for five consecutive CPI prints . This phenomenon is partly attributed to foreign producers absorbing the costs of tariffs and the powerful deflationary force of Artificial Intelligence (AI) standing before us .

Crypto Week in DC: Regulatory Clarity and Mainstream Adoption

Recent developments in Washington D.C. during “crypto week” indicate a significant shift towards mainstream acceptance and regulatory clarity for the digital economy . Three key bills were voted on:

• Anti-CBDC Act: This act, considered the least controversial, aims to prevent government surveillance through digital dollars .
• Genius Act & Clarity Act: These acts are designed to establish federal frameworks, providing clarity on what constitutes a security versus a commodity in the crypto space . This regulatory clarity is expected to open the door for traditional financial institutions (“the adults”) to participate more actively, particularly in areas like stablecoins for payment and treasury operations .

The increased lobbying efforts, exemplified by organizations like Fairshake, signal the growing influence of the crypto industry in Washington, moving beyond just “pro-crypto” stances to discussions about specific guardrails and regulations . This year is seen as a pivotal moment for Bitcoin and crypto to “grow up,” with government approval and regulatory frameworks paving the way for Wall Street’s deeper involvement . The outperformance of altcoins like Ethereum and the drop in Bitcoin dominance suggest a broader expansion of the crypto ecosystem with more participants .

The AI Arms Race and its Societal Impact

The AI arms race between the US and China is accelerating, driven by both countries’ realization of their mutual dependence (e.g., US needing rare earth, China needing chips) and the pursuit of military supremacy and global dominance . While software development in AI is moving incredibly fast, the primary constraint on AI’s future development and timing is electricity . There’s a projected shortage of electricity over the next five years, requiring significant increases in hardware and cost to produce it .

The impact of AI is already visible in earnings reports of major financial institutions like JP Morgan and Goldman Sachs, showing significant productivity and efficiency gains from AI integration . Furthermore, companies like ABB and Legrand have seen their earnings driven by massive US data center demand, indicating a significant buildout in infrastructure .

Beyond infrastructure, AI is beginning to impact the job market. Accounting and law firms are slowing entry-level hiring due to anticipated changes over the next five years, potentially leading to a surplus of trained professionals with nowhere to go . This technological revolution will have broad positive and negative ramifications across the economy .

Fostering an Entrepreneurial Mindset in the AI Era

In response to these changes, there’s a strong emphasis on cultivating an entrepreneurial mindset . Tools like Grock 4 (an LLM) are highlighted as powerful resources that can enable individuals to become entrepreneurs quickly and affordably. For example, a graduate struggling to find a job could use Grock 4 for $300 a month to learn about entrepreneurship, build a website, and market a new business within a month, leveraging their existing skills in a new way . This approach empowers individuals to create their own opportunities and potentially disrupt larger, more established entities that may have been slow to adapt . The accessibility of AI tools, particularly voice-activated interfaces, is changing how even young children interact with information, making complex tasks more approachable and fostering a new generation of digital natives .

The future will likely see continued rapid technological advancement, requiring adaptability and a willingness to embrace new tools and opportunities.