The uncertainties and liquidity constraints of the ongoing government shutdown drove a tough few days for equity indices, which shed several points for the worst week since President Trump pulled out the Big Board in the Rose Garden. This increasing liquidity tightness continued to manifest in the repo market, as SOFR spiked to abnormally high spreads before the largest draw on the Standing Repo Facility since 2020 extinguished the pressure, at least for now. The talk track among the policy wonk class has shifted to clear acceptance of the need for some meaningful Fed balance sheet expansion in response, though it remains unclear if all parties at the table are ready to embrace that reality as eagerly as others. Bitcoin wasn’t immune to the bearish sentiment, briefly dropping as low as ~$99,000 for the first time since June before recovering the $100,000 level a couple times and holding above there as of this writing. As always, the magic line artists on both sides came out in earnest, and we’ll let readers take their own view on whether we’re looking at a failure at the 50WMA or a common Fib retrace.

In weeks like these, we like to zoom out and ask ourselves what the bigger picture tells us. Assuming bitcoin continues to function as expected – as a global, credibly neutral protocol for trustless value transfer whose native bearer unit has a verifiably fixed supply – what do we think is likely to happen as a system preprogrammed for constant liquidity injections continues to ramp up its native unit debasement just to keep the wheels spinning? What do we think is likely to happen as the historically indebted global hegemon who built this system and its resulting trade imbalances struggles to claw back decades of supply chain internationalization to the domestic sphere? As more under-30 voters push back against being priced out of upward mobility and elect charlatans promising free stuff to lead our major cities? As the incumbent power declares a “national housing emergency” and “runs it hot” in response to buy back votes and keep its interest burden manageable? As the tech giants enabling that aggressive nominal growth become “too big to fail” and end up with a backstop from the same overextended hegemon trying to hold this all together?

Perhaps some readers object that bitcoin can’t benefit from these trends long-term because it’s destined to fail for some technical or economic reason – fair enough, though we humbly submit that all your objections may be weaker than you think.

But let’s say it doesn’t fail: what do you think is likely to happen?

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