Compiled & edited by TechFlow
Guest: Jeff Park, Head of Strategy at Bitwise Alpha
Host: Archie
Podcast source: Archie Podcast
Why Bitcoin Wins in Chaos: Bitwise's Jeff Park Explains | Jeff Park | E005 Y25
Air Date: May 15, 2025
Summary of key points
In this podcast, the host will discuss with Jeff Park: the global impact of the US government's purchase of Bitcoin, how the macro economy attracts institutional investment, and the far-reaching impact of tariff policies on the market.
Summary of highlights
By 2025, Bitcoin will become a core asset in the macroeconomic narrative. No matter how the macro environment changes in the future, Bitcoin will be the ultimate winner.
Bitcoin is an escape from a system of financial oppression. Rather than stealing wealth from the future through debt, invest in yourself and prepare for the world ahead.
Bitcoin may no longer fully follow the "four-year cycle" pattern driven by halving in the future. If it still shows cyclicality, it is more driven by macroeconomic factors. However, it is more likely that the trend of Bitcoin will be determined by actual realized profits, unrealized profits and losses, and the pace of market adoption.
Trump may promote intervention by creating chaos in the coming months. In this environment, the stock market may continue to be volatile or even fall. When risk assets are generally sold off, Bitcoin usually performs poorly.
Trump’s primary goal in promoting tariff policy is to reduce the United States’ financing costs, because this is not only the engine of US economic growth, but also the foundation of US dollar hegemony and global economic growth.
Many things we take for granted in the financial system can actually be redesigned. Cryptocurrencies, especially stablecoins, may provide a new solution in this regard.
Tether has, to some extent, replaced the US government and enjoyed a special "monetization privilege."
Volatility is harmful because it drives up the cost of capital. Once the cost of capital rises, investors need to sell assets to meet banks' collateral requirements, which can trigger a cascading sell-off, which is why financial stability is so important.
I'm not sure the next generation will be better off than my generation. I'm not confident that today's children will have a better life and prospects. In fact, some long-term polls show that people's confidence in their future lives being better than their parents' is at an all-time low.
For ordinary investors, they should benefit as much as possible before the country takes action, so I hope more people will accumulate Bitcoin as individuals on a global scale. If you really believe that Bitcoin is an equal benefit, it should take precedence over individualism rather than the country.
The biggest “deal” struck among global societies over the past few years is that we have traded “unequal prosperity” for “unhappy peace.”
Financial oppression allows us to maintain peace. It steals wealth from the future through debt, and the future is invisible. This endless cycle of debt is actually intergenerational theft. If you can't take resources from your neighbors, then take them from the future. This is the price of peace.
There are multiple challenges in monitoring cross-border capital flows, mainly due to lack of transparency and complex financial structures. First, cross-border flows are often difficult to monitor because the mechanisms by which they occur are not always reported. Second, the use of leverage in the financial system is also a difficult factor to grasp. In addition, the global carry trade relies on a large amount of leverage, and this leverage accumulation dynamic increases the fragility of the financial system.
The dollar's dual role as both the U.S. currency and the global reserve currency has created the Triffin Dilemma: on the one hand, the U.S. needs to manage its economy through domestic monetary policy; on the other hand, the dollar's status as a global reserve currency is affected by international capital flows, complicating the relationship between supply and demand.
You rarely hear patriotism mentioned as part of the investment conversation in the U.S. Investors are more focused on business returns than on how to serve the national interest through investment.
Bringing more countries on board could lead to some kind of Bretton Woods-style international agreement that could redefine global security and help the United States manage its debt costs by bringing in new capital partners, which is its ultimate goal.
It is impossible for the United States to build a strategic Bitcoin reserve alone, because international alliances are interdependent. If a real strategic reserve is to be established, the United States needs to coordinate with its allies.
Blockchain can leave an immutable record of behavior and provide assurance of data ownership. The first intersection of cryptocurrency and AI is likely to occur in the field of data ownership.
Jeff Park's role at Bitwise and his experience building the Alpha brand
Archie:
Jeff, as the head of Alpha strategy at Bitwise, could you please briefly introduce your job content and responsibilities?
Jeff Park :
Absolutely. I joined Bitwise about three and a half years ago and was primarily responsible for building the Alpha brand. This was to complement our existing cryptocurrency investment products and help investors discover new investment opportunities.
Bitwise has been established for more than 7 years. It is an achievement to survive in such a volatile industry as cryptocurrency. The volatility of the crypto industry brings challenges, but also provides many unique investment opportunities. My main task is to help professional investors find Alpha in this field, that is, excess returns.
Simply put, simply investing and holding Bitcoin can be considered an Alpha from an asset allocation perspective. But if you dig deeper, there are many inefficient markets, arbitrage opportunities, and structural dislocations in the more complex crypto market, which may bring investors high-quality risk-adjusted returns. My mission at Bitwise is to help investors identify and seize these opportunities.
Jeff's most confident macro trading strategy and the different roles of Bitcoin
Archie:
You recently mentioned a macro trading strategy that you called your most confident trading plan. Can you briefly explain the core of your macro trading strategy?
Especially considering the recent tariff issue between the United States and China, and the market's reaction to it, this seems to be a good entry point and will also help everyone better understand your analysis logic and decision-making methods.
Jeff Park:
I think the unique thing about Bitcoin is that it reflects the perspectives of different investors and their original intentions for entering the cryptocurrency field. In general, investors' understanding of Bitcoin can be divided into three categories:
The first category is financial services professionals who view Bitcoin as an asset allocation tool, especially as a non-correlated asset (not tied to traditional market fluctuations) and a store of value.
The second category is technology-driven investors who are more concerned with Bitcoin’s network effects and the scalability of payment technology, which is completely different from the concept of value storage.
The third category is investors who approach Bitcoin from a trade perspective. They view Bitcoin as a frictionless, borderless payment tool rather than a store of value or technology investment, and focus more on its convenience in capital flows.
Bitcoin will perform differently in these narratives depending on the macroeconomic environment. I believe that Bitcoin will enter a new phase starting after the 2024 election. In this phase, macroeconomic factors will become the main lens for investors to focus on Bitcoin, especially in 2025. The reason is that global economic uncertainty persists, and no matter who is elected as the US president, this uncertainty will drive Bitcoin to become a safe-haven asset.
We have seen that Bitcoin has gradually become the dominant asset in risk trading, while other Altcoin have performed weakly. In addition, Bitcoin's volatility is also adapting to a more turbulent world. For example, recently the actual volatility of the S&P 500 index even exceeded that of Bitcoin, which is a very special phenomenon in the current complex economic environment.
Therefore, I believe that Bitcoin will become a core asset in the macroeconomic narrative by 2025. In summary, no matter how the macro environment changes in the future, Bitcoin will be the ultimate winner.
Market response to tariffs
Jeff Park:
There are two possible ways the macro story could play out. One is a highly inflationary world, and the other is a deflationary world, and both scenarios are actually good environments for Bitcoin because Bitcoin is essentially a unified asset that can represent a store of value that is relevant in either an inflationary U.S. or a deflationary global environment.
The pace of adoption may vary across different market segments. So the fundamental market scenario that most investors are looking at right now is that Trump is not going to make tariffs a permanent fixture in the U.S.'s ongoing globalization and trade liberalization efforts for the next 20, 30 years. I think that's a fundamental underlying view. The market is still hopeful and looking forward, which is why the market rises when Trump dials back the tariff rhetoric a little bit, and falls again when Trump ratchets up protectionism again and tariffs go up.
The current mainstream expectation in the market is that the Trump administration will eventually gradually lift its protectionist policies, which will allow global trade and business activities to return to normal. In this case, the United States will continue to maintain its fiscal dominance and regulate the economy through currency devaluation and inflation, which has been the mainstream framework for the operation of the global economy since 1971. Bitcoin will continue to benefit in this environment because it is a value storage tool that can counter the depreciation of the US dollar and is equally attractive to investors in not only the United States but also in other countries.
But in this scenario, the United States remains relatively strong. The United States is able to demonstrate dollar and financial flexibility to its allies and enemies, and maintain a superior position in the global monetary framework. Another scenario that the market is worried about is that Trump continues to push at some point, causing military and market stability, which is actually deconstructing the global trading system that the United States and its allies have benefited from since 1971. In this case, there will be many ripple effects. But I think the biggest ripple effect in this scenario may be felt by foreigners because the United States has many alliances around the world and these investors benefit from the ability to invest in US assets.
For example, Japan is one of the largest financial allies of the United States. They currently hold more U.S. Treasury bonds than China. Japan provides a lot of cheap capital to American consumers and also invests in assets such as stocks and real estate in the United States. However, if the U.S. trade deficit is reduced and the capital account surplus decreases, countries such as Japan may reassess their investment strategies and shift some funds from U.S. assets to other areas. In this case, Bitcoin may become one of the main options for these countries to hedge against the uncertainty from the U.S. economy.
The Global Carry Trade Explained
Archie:
In the scenario of global economic deconstruction, how much capital can Bitcoin absorb or attract?
Jeff Park:
This number is huge because it depends not only on the nominal amount of existing securities, but also on the velocity of these capitals. Usually we think of gross domestic product (GDP) as a static indicator, representing the total amount of economic activity at a certain moment. However, the dynamics of economic operation are more like the relationship between the balance sheet and the income statement, and the velocity of money circulation plays an important role in it.
In recent years, the velocity of money has increased significantly due to changes in the funding model. For example, an important strategy implemented by Janet Yellen during her time at the U.S. Treasury was to replace long-term bonds (such as 10-year or 30-year bonds) with more short-term Treasury bills (such as 3-month or 6-month bills). Currently, about one-third of U.S. funding programs rely on short-term bills, which need to mature and be reissued (i.e., "rolled") frequently. In contrast, the capital cost of long-term bonds is fixed and does not need to be adjusted frequently. Therefore, the widespread use of short-term bills actually accelerates the circulation of capital.
Likewise, it is not enough to focus on the nominal amount of U.S. Treasuries held by Japan; one also needs to consider the role these bonds play in supporting the global carry trade system. The global carry trade is a complex financial activity that seeks to profit from price differences between different markets. Although its size is difficult to estimate accurately, it is certain that its impact on global capital flows is huge.
Challenges of monitoring cross-border financial flows
Archie:
Why can't we accurately track the scale of global capital flows?
Jeff Park:
Monitoring cross-border capital flows presents multiple challenges, primarily stemming from lack of transparency and complex financial structures.
First, cross-border flows are often difficult to monitor because the mechanisms by which they occur are not always reported. For example, there is no real unified record of how some countries operate and how they hold government bonds. No one knows exactly where the government's bonds are held and which entities they belong to, which may have different reporting exemptions depending on the jurisdiction. This is a structural and jurisdictional problem.
Secondly, the use of leverage in the financial system is also a factor that is difficult to grasp. In the field of cryptocurrency, operations such as "recursive loop trading" are particularly typical. This trading model refers to borrowing an asset, depositing it, borrowing it again and repeating the operation, forming a self-loop similar to the fractional reserve banking system. Since the nominal amount involved in this transaction is dynamically changing and not easily tracked widely, it increases the difficulty of monitoring.
The essence of global carry trade is to make profits mainly by taking advantage of the difference in financing costs between different markets. For example, interest rates in Japan and the United States have been at a low level for a long time, which makes it theoretically possible for carry trades to achieve profits through large-scale leverage. However, the premise of this model is that interest rate fluctuations remain stable. However, once interest rate fluctuations exceed expectations and basis spreads expand rapidly, a crisis may be triggered.
Many global carry trades rely on a lot of leverage, and the accumulation of this leverage is often based on long-term trust in the stability of the US dollar and the yen. This dynamic of leverage accumulation increases the fragility of the financial system. Therefore, the Federal Reserve has called for stronger transparency requirements for institutions such as hedge funds in recent years. These institutions are generally not subject to traditional public reporting regulations (such as 40F fund requirements), making it difficult to fully understand their activities. Currently, regulators are trying to grasp the dynamics of these liquidity pools through higher transparency requirements in order to better deal with the risks that carry trades may bring. This is still a process that requires long-term efforts.
Trump's impact on 10-year Treasury yields
Archie:
The current economic environment seems very tense, like a powder keg that could explode at any time. Trump has reappeared in the public eye, and one of his economic goals is to push down the 10-year Treasury yield. However, from the market data I have seen, this has not changed due to his tariff policy, and the market reaction is even the opposite of his expectations.
Why is this happening? What are the consequences? What other tools does Trump have to achieve this goal? I remember you mentioned that if Trump wants to get the 10-year yield down, he will do everything he can to push for it. I'm curious, what else can he do specifically?
Jeff Park:
This is a complex question. First, many mechanisms in financial markets have the characteristics of self-balancing. Most of our operations in the capital market can be regarded as "zero-sum games", that is, the gain of one party often means the loss of the other party. However, in some cases, by taking advantage of factors such as leverage, volatility or duration, some arbitrage opportunities can be found, thus breaking the "zero-sum" situation on the surface. But overall, most financial activities still follow the "zero-sum" principle.
Regarding the relationship between the 10-year Treasury yield and the US dollar exchange rate, in theory they are related. In an ideal market, if a country's interest rate rises, its currency will usually depreciate. This is because the foreign exchange market follows the "no arbitrage condition", that is, investors will choose to transfer higher yields to other markets to obtain the same return. For example, if I can get a higher yield in the United States, I can transfer these earnings overseas in exchange for the same return.
The relationship of the currency pair is very important. If the US interest rate is high, under no-arbitrage conditions, you have to balance this by letting the dollar depreciate, and it is very difficult to achieve a lower 10-year Treasury yield and a lower dollar.
Generally speaking, interest rates and the dollar exchange rate must move in opposite directions. So the question is, what should we prioritize? Should we choose a lower dollar exchange rate as our target, which might lead to higher interest rates? Or should we choose lower interest rates, which might mean a stronger dollar? There is actually a zero bound condition on this relationship.
What we are seeing is that the market has, to some extent, decided to prioritize a lower dollar. This can be seen in foreign market behavior. And the fluctuations in the back end of the yield curve for ten-year and thirty-year bonds are actually completely independent of decisions about U.S. monetary policy. A huge misconception about the shape of the yield curve is that the Fed can actually only influence the short end of the curve. When they set their benchmark interest rate policy, they are actually controlling the short end of the funding cost of the bank liquidity system (that is, the interest rate part of the yield curve for shorter-term bonds or financial instruments).
The long end of the yield curve is usually the buyer and seller of long-term bonds, and most of the long-term debt of the United States is held by foreign investors. They can actually have some influence in this regard, and this influence is closely related to the credit rating of the United States. As the representative of the world's risk-free sovereign assets, U.S. Treasuries are regarded as the cornerstone of the modern financial system, and other assets are often priced based on them. However, in recent years, this assumption has begun to be questioned.
If the market doubts the risk-free nature of U.S. Treasuries, it may demand higher yields to compensate for the risk, which is one of the reasons why the yield on the long end of the yield curve rises. This phenomenon is closely related to the relationship between the U.S. trade deficit and capital account surplus. Simply put, when the United States has a trade deficit, a large amount of US dollars will flow to foreign countries to purchase foreign goods and services. But these dollars will eventually flow back through investment in U.S. assets, such as buying U.S. Treasuries or stocks. This capital inflow forms a surplus in the capital account and is one of the reasons why the U.S. capital market is highly developed.
How Stablecoins Solve the Triffin Dilemma & Eurodollars
Archie:
On the surface, the US trade deficit is often seen as the result of other countries "exploiting" the US. However, a key point you mentioned is that a trade deficit is actually a necessary condition for the US dollar to be the global reserve currency. In other words, if the US dollar is to maintain its global reserve currency status, the US must maintain a trade deficit in order to provide sufficient US dollar liquidity to the world.
So, is it possible to have no trade deficit and still have the dollar maintain its status as the world's reserve currency?
Another concept that confuses me is the Eurodollar System, in which dollars are not created directly by the Federal Reserve but rather through the European banking system.
So, are there other ways to create dollars globally? In other words, is it possible to maintain the dollar’s role as the global reserve currency without relying on trade deficits?
Jeff Park:
Many things we take for granted in the financial system can actually be redesigned. In my opinion, cryptocurrencies, especially stablecoins, may provide a completely new solution in this regard.
First, the relationship between the trade deficit and the capital account surplus is this: when the United States imports more than it exports, foreign companies earn a lot of dollars by selling goods to the United States. These dollars will eventually flow back to the United States in the form of investments in U.S. assets, such as buying U.S. Treasury bonds or stocks. This return of funds forms a capital account surplus.
However, the US dollar is not only the currency of the United States, it is also the global reserve currency. This dual role brings about the Triffin Dilemma: on the one hand, the United States needs to manage its economy through domestic monetary policy; on the other hand, the global reserve currency status of the US dollar is affected by international capital flows, which complicates the supply and demand relationship.
This can be understood by analogy with China's dual foreign exchange system. China has two RMB: CNY (onshore RMB) for the domestic market, and CNH (offshore RMB) for the international market. Although they are the same currency, they have different prices and liquidity due to their different uses. With this separation, China is able to better manage the demand for currency at home and abroad.
For the United States, the key to solving the Triffin dilemma may lie in the introduction of a similar dual-track system, and stablecoins may be able to play this role. Stablecoins can be designed as a digital currency pegged to the US dollar, allowing foreign investors to purchase US Treasury bonds without directly holding US dollars. This will not only reduce the demand pressure on the US dollar, but also allow the US dollar to focus more on serving the US domestic economy.
For example, currently foreign investors need to convert U.S. Treasury bonds into U.S. dollars before purchasing them. But in fact, their goal is to obtain the security of U.S. Treasury bonds, not the U.S. dollar itself. If foreign investors can directly purchase U.S. Treasury bonds with their own local currency or other digital currencies through stablecoins, they can bypass the direct demand for the U.S. dollar. This mechanism will completely change the current international capital flow model and reduce the phenomenon of excessive demand for the U.S. dollar due to its status as a reserve currency.
Back to the question of the Eurodollar. Can the Eurodollar be considered essentially a proxy for US Treasuries? I would say yes and no. Because the Eurodollar is not officially issued by the US government, it is not directly backed by the US sovereign credit.
Archie:
But the situation with stablecoins seems to be different. Many stablecoins (such as Tether and Circle) are now required to be backed by US Treasuries. I'm not sure when the relevant legislation will take effect, but we already know that Tether has invested a lot of funds in US Treasuries to support the value of its stablecoin. This is a significant difference from how the euro dollar works, because the euro dollar does not have similar Treasury bond backing.
If the use of US dollar stablecoins continues to grow globally, will this exacerbate the Triffin Dilemma?
Jeff Park:
It may indeed exacerbate the Triffin dilemma. Because if the stablecoin is financed through US Treasury bonds, and the purchase of Treasury bonds requires US dollars, this will further enhance the strong position of the US dollar. However, this strength may have a negative impact on US domestic economic policies.
Although the current stablecoin legislation is a good start, I believe it does not fundamentally solve some key problems in the financial system. The current stablecoin operation model is more like a money market fund, but lacks a yield-bearing component (i.e., investment return). This makes the existing US dollar stablecoin an asset portfolio that has no yield and needs to bear certain risks.
For domestic investors in the United States, such stablecoins are unattractive because they do not provide any real returns. However, for some foreign investors, such as those living in Argentina, being able to indirectly access the security of U.S. Treasuries through stablecoins still has some value.
I think a new mechanism may emerge in the future that allows for differentiation between foreign investors and domestic investors. For example, foreign investors may enjoy a certain discount when purchasing U.S. Treasury bonds, while domestic investors do not. This mechanism can alleviate the Triffin dilemma to a certain extent while protecting the domestic economic interests of the United States.
Tether’s role in capturing offshore dollar demand
Jeff Park:
Tether's success is largely due to the strong demand for dollars from offshore investors, who value the security of holding dollars themselves. In fact, this shows that Tether has replaced the US government to some extent and enjoys a special "monetization privilege". This privilege is usually held by the issuing country of the reserve currency, and Tether takes advantage of the demand in the offshore market and converts it into its own profits. This may bring certain economic costs to the United States.
I am not saying that Tether is a negative market player. On the contrary, Tether is simply taking advantage of offshore demand for dollars. The US may realize this and try to establish a similar channel. However, it is unlikely that such a channel would be operated by a US entity, because one of the reasons offshore investors choose Tether is to avoid US regulation. For example, they do not want to face anti-money laundering (AML), know your customer (KYC) requirements, nor do they want to put their assets at risk due to credit freezes or debanking. This concern was particularly evident after the war in Ukraine, as investors were worried that their assets might be restricted for geopolitical reasons.
But there are some gray areas, especially the difference between Tether and Circle. Although they are often compared, they actually meet different market needs. Tether focuses more on the offshore US dollar market, while Circle mainly serves domestic US payment needs.
This reminds me of the history of the Eurodollar. After World War II, many countries wanted to keep their funds in the United States, but were worried about the regulatory risks in the United States, so they preferred to choose Europe as a storage location. France, Switzerland, and the United Kingdom all established Eurodollar markets, and eventually the United Kingdom stood out and became the center of this market. The key is that this market must be offshore to establish credible neutrality and cannot be directly linked to the United States.
Archie:
However, this offshore market is still beneficial to the U.S. because it increases demand for dollars and U.S. Treasuries, thereby reducing U.S. borrowing costs. It will be interesting to watch how this dynamic changes as the relevant legislation moves forward.
Jeff Park:
Currently, we can divide stablecoins into three types.
The first is a non-yield Bearing Stablecoin, which is mainly used in domestic payment scenarios. This type of stablecoin functions similarly to a payment processing tool, such as how to transfer money from Bank of America to PayPal instead of through Zelle. This is actually a question of interoperability between payment platforms. For merchants like Shopify and Stripe, this is also a B2B challenge: how to make the payment process smoother for end consumers? In this case, stablecoins can provide better instant liquidity, while the existing banking system performs poorly in this regard. However, this type of stablecoin is a dollar-to-dollar transaction in a closed system and does not involve any income. I think that users in the cryptocurrency field are not very interested in this non-yield stablecoin at present, because they are more concerned with products that can bring income rather than pure payment tools.
The second type is the Yield-bearing Stablecoin. This type of stablecoin provides a return on investment, but it also triggers the regulation of securities laws. Under current laws, any financial product with income may be classified as a security. This means that non-yield stablecoins may be exempted from the regulation of securities laws, but once income is involved, strict compliance requirements need to be met, such as who can use such products and who can issue them. This will undoubtedly increase complexity.
The third type is the offshore stablecoin. This type of stablecoin is mainly aimed at foreign investors, especially those who want to hold US Treasury bonds and US dollar cash. This is very different from the stablecoin that meets the domestic financial needs of the United States. I believe that the evolution of stablecoins may go through three stages: from non-yielding stablecoins for domestic payments, to yield-yielding stablecoins, and finally to offshore stablecoins serving the global market.
“Bond Guardians” and Patriotism in the Market
Archie:
You mentioned earlier that Janet Yellen's refinancing issues with managing short-term debt seem to be adding to market volatility. What are the chances that they can achieve their goals in this situation?
In your recent article you also mentioned the concept of “Bond Vigilantes”. This term is often used to describe investors who try to influence government policy through market behavior, especially when George Soros broke up the Bank of England in the 1980s.
This market correction mechanism seems to have gone away, but what do you think? Is the volatility in the 10-year Treasury rate now in the market a return of some form of "bond guard"? Or is it just some investors fighting the official narrative? Do you think this is a growing trend? Which market sectors are leading this trend?
Jeff Park:
This is an interesting question. The term "Bond Vigilantes" used to be used to describe investors in the United States, especially those who put pressure on government policies through market actions such as selling bonds. For example, investors like Stanley Druckenmiller or George Soros, who use market power to express dissatisfaction with the Federal Reserve's policies and try to force policy changes.
However, in today's political climate, this behavior may be seen as "unpatriotic". This is in stark contrast to the concept of war bonds in the past. At that time, in order to support military expansion, the government encouraged people to buy war bonds. Although the interest rate was low, it was a way for every citizen to support the country. Buying war bonds was not only an economic act, but also a symbol of patriotism.
I want to emphasize that buying and selling Treasury bonds is a political act to some extent, and it also involves the issue of patriotism. What I am worried about is that if the bond defenders act too strong, the current political atmosphere may regard them as unpatriotic, especially under the "America First" agenda. Any behavior that may increase the financing costs of the United States may be regarded as unpatriotic. In my opinion, this is a relatively sensitive period, and people may resist the bond defenders because no one wants to be called a traitor in the United States.
Archie:
During the COVID pandemic, people like Bill Ackman made a lot of money by short American companies. A lot of people saw that as unpatriotic, but there wasn't a big institutional backlash. Why do you think that was the case? Why was there no reaction then, but you think it might be seen as unpatriotic now?
Jeff Park:
I think there is some reaction. Bill Ackman doesn't usually short companies he invests in, so that's different. He has short in activist investing, like Short. Bill Ackman has a history of short. But I would say that the fact that Bill Ackman is not short as frequently now reflects a new understanding of patriotism in elite circles. Short has become a challenging conversation.
However, I also think that many people would agree that short is an important part of the normal functioning of the capital markets. When the market is not priced correctly, short helps to find the correct price. The US market allows short because it ensures that the market operates at a reasonable price.
Other countries sometimes ban short during financial crises. In the U.S., short of financial stocks was also banned during the financial crisis. These measures may seem untrue to the spirit of American capitalism, but they are often taken when a government or market needs to be rescued.
Control through regulation. This actually reveals a huge myth of American capitalism. On the surface, the United States is a capitalist country, but when national security is prioritized, many things happen behind the scenes that may appear less "American" and even contradict traditional capitalist ideas.
Archie:
If Americans stop short, what happens to the rest of the world?
What do you think of the rumors a few days ago that Mark Carney, now Prime Minister of Canada and former Governor of the Bank of England and Bank of Canada, may have coordinated an international effort by a group of like-minded countries to counter Trump's tariffs by gradually and continuously selling off US Treasuries?
Jeff Park:
I think it depends on how countries support their currencies. If the US continues to devalue the dollar, it will cause other currencies to rise in relative value. This is very unfavorable for countries that rely on exports. Therefore, these countries need to devalue their currencies by selling them, which means they have to buy more dollars. In order to achieve this goal, they need to adjust their asset allocation. This is one of the reasons why China has to achieve monetary control by selling some US Treasury bonds.
Archie:
This sounds like a perfectly rational explanation, but I wonder if there are some more vindictive motives behind this as well?
Jeff Park:
There may be such factors. But at the same time, it can also be reasonably understood as an act of protecting the economic interests of one's own country. That's why I find it ironic when people mention the term "currency manipulator". Because currency manipulation is never a unilateral act, it always involves the interaction of a pair of currencies, and the market will react to this interaction.
Archie:
Another reason I bring this up is that if U.S. investors don't short, this could provide a huge opportunity for international investors. If U.S. investors give up short because of patriotic sentiment, this could give international investors a very attractive market space. I'm curious how long U.S. investors can hold back from seizing this opportunity, driven by patriotism?
Jeff Park:
We need to be clear that short and selling are completely different concepts. International investors can choose to sell the assets they hold, and this in itself is enough to have a big impact on the market. I don't think international investors need to impact the US market through speculative short. They just need to reallocate capital and reduce their holdings of US assets, which may put more pressure on the market than short selling by US investors. So it is understandable that US investors are worried about this. At the same time, international investors may also choose to diversify their investments and move their funds elsewhere because they are worried about falling global asset prices.
Archie:
This is indeed a realistic question. I am surprised that you mentioned that patriotism may affect the decision-making of American investors. At present, this culture seems to be reinforced to some extent through the policy signals of the White House. However, I don't see too many clear signs. What do you think?
Jeff Park:
I do feel like there is a trend of trying to bring the idea of national unity into the mainstream conversation, but unfortunately that can sometimes have some negative consequences, like trying to define what "American identity" is, which is often a very divided issue.
I recently read a book that impressed me a lot, "The Technological Republic" by Alex Carp. The core idea of the book is that some of the problems of current American capitalism actually stem from the broken relationship between the technology industry and the government. Looking back at history, many of our great technological revolutions, such as space exploration and atomic weapons, were driven by large-scale government-funded research projects. These projects relied on public budgets and eventually found opportunities for commercialization.
The internet is also a classic example. However, with the rise of the internet, the culture of the technology sector changed, with a greater focus on commercialization and consumer-centric goals. This shift has led many technology companies to de-emphasize partnerships with the government. While these companies have indeed created many amazing products, they have sometimes been too focused on short-term consumer needs. For example, a service like Doordash is indeed convenient, but is it more important than technologies with greater public value, such as emergency communications? While these services have improved efficiency, their innovation direction seems too consumer-oriented. Similarly, online dating services, while interesting innovations, are still centered on consumer needs.
The core discussion of this book is how to rebuild the culture of American patriotism. To do this, we almost need to re-establish the public-private partnership that is almost completely missing in the current political environment. Neither the Trump administration nor the Biden administration has really promoted this kind of cooperation. However, only by establishing a true public-private partnership can people develop a belief in serving the greater good of the country and thus achieve national unity and pride. This cultural decline is an important issue facing the United States in recent years and needs to be more included in mainstream discussions.
Archie:
In fact, the fact that the government funds technological innovation has always been a theme emphasized by people like Tronsky. Their point is that the government takes risks that industry is unwilling to take. I understand that many technology companies are now well-funded, even to an unprecedented degree. Therefore, they are investing a lot of money in so-called "moonshots", that is, innovative projects without clear commercial prospects. This attempt is similar to the moonshot program of the year. Although it was not the original intention, this effort has led to many unexpected and far-reaching technological breakthroughs. However, the problem is that it is difficult to find similar transformative innovations from the commercial sector.
Jeff Park:
These transformative investments take a long time and cannot generate returns quickly. Another problem is that with the global over-financialization, venture capital has gradually become an institutionalized industry with higher and higher requirements for investment returns. This trend further limits the development space for long-term innovation projects.
Everyone is influenced by incentives, so will you choose to invest in "moonshots" that may take decades to see results? Or will you prefer projects that can get returns in a few years? History shows that this risk-return is difficult to establish without the support and subsidies of public capital. Instead of investing in major innovations that may change the world, such as cell engineering or the development of super-fast aircraft, it is better to invest in companies like Bumble, which are more likely to be acquired by large companies with abundant funds and more certain results. And major innovations with potential commercial value are often not given the same attention as consumer-oriented projects.
Archie:
I agree. While technology companies do innovate a lot internally, these innovations are often only open to a few internal people and are subject to strict approval restrictions. The technological innovation funded by the US government is completely different. It can be open to a wider range of economic sectors and entrepreneurs, making it easier to find commercialization opportunities. This may also be a limiting factor. I want to emphasize that over the past few decades, government-funded technological innovation has often been aimed at solving national problems, rather than requiring proof of commercialization at the outset. In the end, the results of these efforts, whether successful or not, will bring about a sense of national solidarity. With the exception of the moon landing program, these studies are usually not intended to inspire national sentiment, but to respond to national problems.
Jeff Park:
This is also the biggest misunderstanding and blind spot of the United States in its competition with China, which excels in public-private partnerships. If you look at a large economy that actually “produces” things, China’s investment priorities are in areas that prioritize national security. For example, China’s production in areas such as automobile manufacturing, cement production, and mineral refining far exceeds that of the United States. These investments not only advance national security, but also bring huge economic benefits.
Yet, in the U.S., you rarely hear patriotism mentioned as part of the investment conversation. Investors are more focused on business returns than on how to serve the national interest through investment.
This view is not popular in the United States, but China has been practicing it for a long time. Especially in times of crisis, the importance of this public-private partnership cannot be underestimated.
The capital market may not only fail to solve the problem, but may exacerbate it. Alex Carp mentioned in his book that the biggest growth areas in the U.S. technology industry mostly come from advertising businesses, such as companies like Facebook. The core of the advertising business is to attract as many users as possible, so companies must try to avoid expressing any position to avoid alienating certain groups. This model causes these companies to become "positionless" and unable to participate in national culture or national agendas. This phenomenon is also reflected in the issue of cultural division, especially the younger generation, who are rarely exposed to opportunities to participate in constructive dialogue while growing up.
Alex also often mentioned that this phenomenon has led to some of the problems we face today, such as "cultural nihilism." Part of the reason is that there is now a generation of young people who have come of age, but they have never been taught how to participate in meaningful conversations. Because in current social standards, offending others is considered a very serious matter. One of the roots of this phenomenon may be related to the profit model of the search advertising business. In order to maximize profits, these companies have to remain as neutral and "clean" as possible to attract more audiences. This model has shaped the current cultural environment to a certain extent.
Archie:
We saw Elon Musk take over Twitter (now Platform X). The subsequent reaction from some brands indicated that this seemed to be a "brand conspiracy" and that they were either overly sensitive or perhaps politically motivated. However, their concerns about brand safety are real. Brand safety has long been used as a tool for content review, not just on Twitter, but on all platforms. This also reflects the kind of "boring" and "faceless" issues you mentioned.
I find it interesting that China is often mentioned as an enemy of the United States. As a non-American, I don't completely agree with this statement. I think China is more like a competitor of the United States. They do compete in terms of size, industry, market, and customers.
But what I find ironic is the contrast between the two countries. China emerges as a strong advocate of global free trade, while at the same time, some of the institutional elites in the United States support tariff protectionism. This situation is very ironic to me. I can't help but wonder, how can a country that many still call "communist" be more supportive of global free trade than a country whose core image is capitalism and free trade? After all, the United States used to be the main promoter of globalization, right?
Jeff Park:
We need to be careful when it comes to the trade liberalization policies that the United States may promote today. I call it "conditional bilateralism." The United States is now trying to re-adjust global trade rules to ensure its own security interests while addressing dynamic challenges that are unfavorable to the United States. I think the core problem facing the United States is that when global trade involves all countries, the situation becomes complicated, and problems similar to the "prisoner's dilemma" and moral hazards arise. Countries tend to take different actions for their own interests. And now, this global trade system may be breaking apart because it has been running for too long and many problems have not been really solved.
But this does not mean that the United States will move towards protectionism, such as closing its borders. This is not good for the United States either. On the contrary, the United States hopes to gain more benefits through bilateral negotiations and make up for the parts that it has not been able to obtain in global trade in the past. This is not a simple question of "good" or "bad", but a spectrum question: How do we find a new balance among the results that have been considered "good" in history?
This also raises the question of Trump's motivations, such as why he is pushing tariff policies or creating trade chaos. In my opinion, his primary goal is to reduce the cost of financing for the United States, because this is not only the engine of economic growth in the United States, but also the foundation of the dollar hegemony and global economic growth. And to reduce the cost of financing, you need support from other countries. The United States does need other countries to increase their participation in financing its debt. Recently we have seen that China has reduced its support for US debt and Japan has increased its input. Maybe it is time for more countries to join in. I think this dynamic may lead to some kind of international agreement similar to the Bretton Woods system. Such an agreement may redefine the global security mechanism and help the United States manage its debt costs by bringing in new capital partners, which is the ultimate goal of the United States.
The current market volatility is actually trying to pave the way for this goal. Whether it is by creating chaos in trade relations or by disrupting the US stock market to force the Federal Reserve to intervene, it is to attract more countries to participate. Recently, Scott Besson mentioned that the United States may consider yield curve control, which shows that the United States is gradually approaching Japan's policy path. I have always believed that if you want to understand the future, you only need to look at Japan. Japan's policies are basically 30 years ahead of the United States. The United States may eventually have to take similar measures.
Archie:
This is something I've been thinking about for the past five years. While I don't have your experience and background in financial markets, my gut tells me that the changes in the United States over the past 20 to 30 years have essentially been a generational war. The baby boomers realized early on that the government might not be able to adequately fund their retirement. So, they solved the problem by driving growth in the housing market and the stock market. Now, we are seeing a reversal of that trend. I think this could lead to a transfer of wealth, perhaps even skipping a generation.
Jeff Park:
I felt similarly late last year. I believe the biggest “deal” made by the global community over the past few years is that we have traded “unequal prosperity” for “unhappy peace.”
Today we are very lucky that as ordinary people, we are mostly not involved in wars and conflicts, and we can enjoy a higher standard of living than previous generations. We all benefit from higher basic living conditions, such as services such as Netflix, which are now available to almost everyone. In the past generation, these things were unimaginable.
Archie:
The fundamentals of our lives have certainly improved a lot from a consumption, commerce, technology perspective, but in terms of satisfying basic human desires, like having a family, having a sense of community, buying a home, and having a decent life, I think those have been steadily deteriorating for at least the last 20 years.
I have been in the workforce for over 20 years and have been waiting for a real estate market correction that never really happened. I thought that if I just saved some money and waited for the market to correct, I would have the opportunity to buy a house, but that opportunity never came. It wasn't until I learned about Bitcoin that I began to understand how money printing and liquidity support market prices. We do have these technological devices that allow us to communicate with people all over the world. But I live in London and the subway system is terrible, while some small cities in China have better airports than London Heathrow Airport.
But from another perspective, I'm not sure the next generation will live better than our generation. Will today's children have a better life and prospects? I don't have that confidence. In fact, some long-term polls show that people's confidence in their future lives being better than their parents is hitting a record low. I'm actually a little pessimistic about this.
Although we have a higher technological base, some basic desires seem harder than ever. I know Elon Musk once said, "Go ahead, people in the past were poorer than you." But that's not the point. The point is that in our current environment, people are not willing to further sacrifice their quality of life to achieve these desires, and our direction of development should be upward, it should become better, easier, and more prosperous.
Unfortunately we are no longer maintaining the status quo, but are beginning to erode the foundations that allow people to achieve their aspirations. What do you think about this?
Jeff Park:
I agree with you. That's why I call it an "unhappy peace." Although we enjoy peace, this peace comes at a price, and this unhappiness is caused by the conditions you mentioned. If you think about it carefully, you will find that the root of these problems is financial oppression. Financial oppression allows us to maintain peace because it steals wealth from the future through debt, and the future is invisible. These children have not yet been born and will not be able to speak for themselves in the next few decades. So this endless cycle of debt is actually intergenerational theft. If you can't take resources from your neighbors, you take them from the future. This is the price of peace.
We have gained a lot from peaceful international relations, but these benefits come at the expense of the future. Financial oppression eventually led to the inflation of asset prices, but also changed people's behavior. For example, now that people are no longer dying in wars and their lives are more stable, they begin to overinvest in human capital. For example, my mother is one of six children. In those days, raising six children was more for the overall benefit of the family, rather than for each child to become a "prince" or "Zuckerberg".
But things are different now. Every child is seen as a potential "Zuckerberg," so people overinvest in their children's education and development, and this phenomenon is behind a peaceful environment. Because we know that children live longer, are generally healthier, and have a higher standard of living. But if it is a world full of wars or unexpected changes, people will not invest in human capital in the same way. This behavior will eventually increase social inequality.
This is why I think Bitcoin is so relevant right now. Bitcoin is an escape route from a system of financial oppression. Instead of stealing wealth from the future through debt, it is better to invest in yourself and prepare for the world of tomorrow. Bitcoin provides a unique way for people to break away from this social transaction system and choose to exit.
Trump's tariff strategy and global trade relations
Archie:
Has Trump's tariff strategy weakened the United States' diplomatic options, while also undermining the goodwill the United States previously enjoyed, making its international position more unstable? Some people mentioned that this tariff dispute is essentially a one-way street. Once you get the rest of the world into this situation, it is difficult for them to turn back. This situation reminds the rest of the world that this US administration is more inclined to transactional behavior rather than valuing long-term partnerships.
Jeff Park:
But I think that relationship can be repaired. However, people may be more inclined to look for an exit for hedging now, which is why I think this is a good opportunity for Bitcoin. Whenever people need to reserve space for extreme risk scenarios, it is good for Bitcoin.
The EU is an actor that is guided by its own interests. They will make decisions based on what is good for them. If China, as a larger economy, can offer more opportunities than the US, such as the recent incident of China cancelling all Boeing aircraft orders, this may bring the EU closer to China.
But on the other hand, cultural identity is also very important in geopolitical relationships. Huntington's "The Clash of Civilizations" mentions some long-term trends that are not driven by economic values alone. In my opinion, the EU has a closer cultural relationship with the United States than with China. It would be surprising if the EU saw itself as closer to China than to the United States. Ultimately, cultural identity is very important in building long-term alliances. This proximity may change over time, but for now, this cultural discomfort is crucial to the formation of alliances.
Archie:
Will the EU accept the option that Trump has proposed: choose the United States or China? But the EU may say: "We will do it our way, not your way, and we will keep our options open." This is also what you are hinting at.
Jeff Park:
This is probably what the United States wants to see. We are imagining a world in which the United States no longer completely dominates security guarantees, but requires other countries to play a role in this area, but this will increase costs.
Archie:
Trump has been making the point that Europe doesn't pay enough in NATO. If European NATO partners aren't paying their fair share and the United States is effectively subsidizing NATO, then if they remilitarize, that actually accomplishes Trump's goal of wanting them to pay more.
I’ve seen a lot of TikTok videos discussing European luxury goods made in China that say “I’m not buying from them anymore”. I’m wondering if this could be some kind of state-driven effort to undercut European and global brands by encouraging consumers to buy goods made in China directly?
Jeff Park:
People buy luxury goods not because of the cost of the goods themselves, but because it represents a concept of luxury, makes them feel good and wants others to feel good about them, and this sense of ritual is the key to the success of the luxury industry. But the Chinese way of thinking is, "You can buy the same bag for less money," and they ignore the fact that the focus is on the feeling of luxury, not the goods themselves. This is a human characteristic of American capitalism.
If this is a planned move, it just shows that there are cultural barriers and they can't really understand each other. I don't think these TikTok videos will influence Americans to buy Chinese-made knockoffs instead of original Italian bags.
If this culture war really heats up, you'll see more people start to define their own cultural values or national identity and what they stand for. Do we support imitation products? Do we support goods that are freely circulated but rejected? I think people living in South Korea can feel the impact of this culture war more directly. South Korea is both an ally of the United States and borders China, which it sees as both a security threat and a trading partner. This cultural conflict is particularly evident in South Korea and Taiwan.
Thoughts on the Strategic Bitcoin Reserve (SBR)
Archie:
Jeff, when you mentioned the Strategic Bitcoin Reserve (SBR) earlier, you expressed some concerns about the prospects of the SBR. Can you explain your views?
Jeff Park:
I think a strategic Bitcoin reserve can be a very important tool at the right time, but I don’t think that time is right now.
First, if the United States accepts Bitcoin now, it may accelerate the decline of the US dollar as the global reserve currency. At present, the United States is not ready to face such a change. Maybe one day in the future they will realize that they need to reshape the monetary order, but now is obviously not the best time.
I made a point last year that explored the three conditions that a country would need to meet to buy Bitcoin on its balance sheet.
First, the country cannot be a direct ally of the United States. Because if a US ally announced the establishment of a Bitcoin reserve, it would be seen as a rejection of the US dollar, thus touching on the core interests of the United States. Therefore, it is almost impossible for a country like Japan or South Korea to take such an action.
Archie:
So countries like Russia, Iran or China might be more likely to build up Bitcoin reserves?
Jeff Park:
Yes, these countries are less connected to the U.S. financial system and can therefore take higher risks.
The second important factor is that the country needs to be politically supportive of cryptocurrencies and have a younger demographic. In countries with an aging population like Japan, supporting cryptocurrencies is not a popular political issue. Countries with younger populations may be more likely to have leaders who support cryptocurrencies.
Archie:
At the user level, we see that the earliest adopters of Bitcoin are usually those who are technology geeks or libertarians. Later, Bitcoin is gradually accepted by a wider range of users. Can we make an analogy to the country level, thinking that some small countries are the first to adopt Bitcoin, and then countries like Argentina may join?
Jeff Park:
From the current perspective, I think it would be meaningless for the United States to establish a Bitcoin reserve through an executive order. An executive order does not essentially represent the will of the people, and the next government may easily overturn it.
I don't think the United States needs to rush to take action now. When the real time comes, the US's actions will have a huge global impact. Before that, ordinary investors should seize the opportunity to accumulate Bitcoin before sovereign countries take action.
Archie:
Do you think this is because younger people are more interested in cryptocurrencies or because they have a longer-term investment perspective?
Jeff Park:
I think it is mainly because young people are more inclined to support cryptocurrencies, while older people are relatively conservative. If you want to win an election, winning the votes of cryptocurrency supporters may be an effective strategy. In this case, politicians are more likely to accept cryptocurrencies and promote them as a means of storing value, or even include them in the country's balance sheet.
Archie:
At the user level, early users of Bitcoin were usually those with liberal tendencies or technical backgrounds. Later, the first major application scenario of Bitcoin appeared in underground markets such as Silk Road. At that time, most of the users were "marginal people" and "outsiders". For example, some people initially only used Bitcoin to buy goods, but later found that its value was rising, so they chose to hold it for a long time. Over time, they gradually gained a deeper understanding of the concept of Bitcoin and eventually became staunch Bitcoin supporters.
I think at the country level, Bitcoin adoption is likely to go through a similar phased progression. Initially it was individual investors, then independent hedge funds. Now, in this cycle, we're seeing more adoption by businesses and institutions. The size of the investors is gradually increasing over time. I would have thought that there would be a similar progression at the country level, starting with countries like Bhutan and El Salvador, and then maybe G20 countries like Argentina. I think there has to be a transitional phase, rather than jumping straight to a superpower like the United States. 18 months ago, even 12 months ago, this idea would have been hard to imagine. But now it seems to be really happening, and it may be on a larger scale than we expected.
So, if the United States built a strategic Bitcoin reserve, what signal would that send to the rest of the world?
Jeff Park:
I don't think it will send too many signals, because if it is implemented through executive orders, it does not represent the will of the people, and we need to distinguish between executive orders and policies established through legislation. For example, the Biden administration has promoted ESG (environmental, social and corporate governance) related policies through executive orders, but these policies have not been widely accepted because they have not gone through the legislative process. If the next administration does not support these policies, they may be repealed. This is the limitation of executive orders.
I think it is impossible for the United States to establish a strategic Bitcoin reserve alone, because international alliances are interdependent. If a real strategic reserve is to be established, the United States needs to coordinate with its allies. For example, the United States should notify its allies in advance and invite them to participate in this plan. Because many countries rely on American assets, if the United States acts unilaterally, it may cause dissatisfaction among its allies. Take Japan as an example. If the United States decides to establish a Bitcoin reserve without notifying Japan in advance, Japan may feel ignored or even offended. Such unilateral actions may disrupt the existing international monetary order, and such changes require multilateral cooperation to achieve.
So if there really is a plan to establish a strategic Bitcoin reserve, we would see more international cooperation and dialogue, rather than the current sporadic unilateral actions, which are more about catering to populist sentiment or electoral needs, but that is far from enough. A higher level of intention and coordination is needed to really push this plan forward. I think the United States has a lot of concerns about choosing the timing, so it is unlikely to go down this path in the short term. The only scenario that might change my view is if legislation was passed to establish a strategic reserve and explicitly allow the accumulation of Bitcoin, which would be a major shift. But even so, it is still a huge challenge to convince people to put resources into Bitcoin instead of other priorities.
Archie:
I am referring to accumulating Bitcoin, not just retaining Bitcoin that has been confiscated through law enforcement actions.
Jeff Park:
In my opinion, the so-called administrative strategic reserve is almost meaningless. It actually does nothing but stipulate that you cannot sell the Bitcoin you already own.
Maybe some people take comfort in that, but the reality is that the price of Bitcoin is not going up because there is no selling pressure. People were hoping for widespread global participation, but that hasn't really happened. The U.S. doesn't need to do this right now. In fact, I don't think they should do it because when the U.S. does decide to include Bitcoin on its balance sheet, it will be a huge change, and you will feel the change in the world when you wake up the next day. It will be very intense, and not the kind you felt in January.
For the average investor, they should benefit as much as possible before the state takes action, so I hope more people accumulate Bitcoin globally as individuals, and then when the state joins, they can all benefit because the cost basis is also important. You want the state to intervene last because if you really believe that Bitcoin is an equal benefit, it should take precedence over individualism rather than the state.
We all need to get involved in this ahead of time. It would be a great pity if Bitcoin reaches an unattainable price in 2025 and 80% of the world's population still fails to participate in this opportunity for institutional change. So I don't think it's a big problem, but one day it will be, and we should all be prepared for it, but it will take longer than people think. It's not enough to just be a cryptocurrency enthusiast and go to Washington to lobby for this, because you realize that there are many other areas in the US government where money needs to be spent. This is actually part of the reason, like after that
