Is Bitcoin A Warning Sign For Global Deleveraging?

The below is a direct excerpt of Marty’s Bent Issue #1228: “Deleveraging bitcoin before the world de-levers.Sign up for the newsletter here.

The bitcoin market is in the process of going through a great deleveraging event. The process started last month when the Luna-Terra ponzi blew up spectacularly and was forced to liquidate approximately 80,000 bitcoin. The process accelerated last week when Celsius, Three Arrows Capital, and Babel Finance proved to be overextended in exotic high-yield token projects that crashed hard and, in the case of Babel, lending to those overextending in these projects.

we said last week, the Fed failing to tame inflation after making some of the most aggressive rate increases in the last thirty years could lead to a collapse in confidence that could release the hyperinflation hounds. Last week, we warned about the Bank of Japan losing control of its yield curve control efforts. As the calendar has turned and price increases around the world seem less likely to slow down any time soon, the situation in Japan is becoming more dire as the Japanese 10-year government bond fails to hold the 0.25% rate the Bank of Japan has been targeting. Japan’s debt-to-GDP ratio is so high that it is literally impossible for them to raise rates in conjunction with Western economies. If they did, they would bankrupt the country in the process. So instead of overt default, it seems that Japan is choosing the route of hyperinflation as they will be forced to print unimaginable amounts of yen to try to control rates.

via DB via ZeroHedge

Like we said last week, if the Bank of Japan loses control and hyperinflation breaks out across the country, it will be game over for the rest of the world’s developed economies who have pursued similar policies, which includes the Fed, the European Central Bank, the Bank of Canada, the Bank of England and many others. A Japan-like blow up is the end state of every single central bank who embarked on QE4eva.

With this in mind, your Uncle Marty is envisioning a scenario that could potentially play out over the course of this summer and into the early fall that may provide a path to “decoupling” for bitcoin.

There’s no way to tell if a significantly de-levered and relatively cheap bitcoin would be the asset that individuals and larger capital allocators turn to as the world goes to shit, finally bringing to fruition the “safe haven” narrative. It’s hard to deny that the conditions for a decoupling to actually happen will be riper than they ever have been. Keep an eye out on this as we get closer to October and November 2022.