Bitcoin Can Reach New Heights as Trump, BRICS Reset World Order

Gold is up 20% year to date. Needless to say, it has outperformed pretty much every market index and asset class so far. 

Its digital brother, Bitcoin, is down 10% this year. Coming into the year, the crypto cult was long Bitcoin holding onto the halving cycle and liquidity strategy playing out, which predicted new highs as the year progressed. Every cycle is seeing the same pattern but the returns are getting lower as the asset becomes mature and it moves up the adoption curve. In the first few cycles, it was only traded by the crypto cult, but today it is owned by various credible institutions like BlackRock and others who recommend a small 1% to 2% allocation to it in one's portfolio. Today, there are still tons of disbelievers.

Gold is your true safe haven asset, one that tends to outperform in times of stress, especially as funds deleverage out of riskier assets. It also benefits from a falling dollar, but so do many other commodities. When one talks of inflation, gold and silver tend to stand out as they are the true inflation hedges, yet silver has been range bound since October 2024. This is due to demand destruction on its industrial side. 

One of the things that changed the trajectory of the gold adoption curve was the Ukraine war, as Russia was pushed out of the SWIFT system and its reserves frozen — a lot of global central banks started diversifying more into gold as they saw what the U.S. could do if a nation fell out of favor with it. China has been offloading its UST for gold over the last few years as there were some thoughts to have a gold-backed digital yuan or CBDC for the BRICS.

Over the past few years, the rise of BRICS has been a great threat to the U.S. and its hegemony as more countries have started trading commodities like oil away from the dollar. Global hegemony does not end overnight, but the writing had been on the wall over the last few years, the world was slowly moving into a bipolar or multi-polar order away from the U.S. 

Therein enters President Trump, wanting to make America great again. His agenda in the first 90 days has been to reset the world order, perhaps with harsh execution, but strategically making sense by grabbing power back and bringing funds back to the U.S., making America "investable" again. The U.S. accounts for about 30% of the world's consumption and so Trump is using that leverage as the exporters need the U.S. more than it needs them, per se. The U.S. has had one of the lowest tariffs of around 2.5%, whereby most countries charge 10% to 15%. After years of overpaying for NATO defense and now global trade, Trump wants to level the playing field.

The U.S. debt deficit was on an unsustainable path, and the Trump team via DOGE and other orders, is trying to lower their obligations so that they can push forward their tax cuts along with other fiscal policies to boost GDP growth. The market is drawing parallels to the Smooth-Hawley tariffs from the 1930s that caused a global recession and a supply shock. More than 70 countries have already come to the table and agreed to pay up the minimum 10% tariffs and, for now, there is a 90-day pause only with China facing 145% tariffs, and China reciprocating with 125% ones; there is zero trade happening between the two to surmise it.

As the market worries about growth, the dollar has now fallen from 110 on the DXY down to the 99 level, as the front of the bond curve is pricing in about four or five rate cuts. Most other central banks are rushing to stem the rally in their own currencies with China selling dollars to prop up the yuan, and talks of the ECB and BOE having to do the same to avoid a squeeze. 

Fiat currency debasement anyone? Perhaps it is now time for Bitcoin to show its true colors and shine after all.

At the time of publication, Bengali had no positions in any securities mentioned.