Wall Street 30-year veteran: The hedging logic of debt, interest rates, and Bitcoin

Source: If You Miss This Bitcoin Run, Don’t Say You Weren’t Told

Compiled & Edited by: lenaxin, ChainCatcher

Editor’s Note:

This article is compiled from the video interview between Anthony Pompliano and Jordi Visser, who is a macro strategy investment expert with 30 years of experience on Wall Street. Jordi will interpret the current economic situation from a unique perspective. In the interview, Jordi also delves into hot topics such as inflation, the stock market, Bitcoin, and AI, and analyzes why market trends often go against mainstream expectations.

ChianCatcher has organized and compiled the content.

TL&DR

1. The definition of “economic recession” in traditional economics textbooks has lost its explanatory power in the context of contemporary economic structures.
2. The market is beginning to see Bitcoin as an indispensable part of asset allocation.
3. The continuous devaluation of currency is an inevitable trend.
4. Independent investors, individual investors, and retail investors are the true driving force of the market.
5. The essence of the “Federal Reserve put option” is perpetual currency devaluation.
6. The core driving factors of Bitcoin price trends are changes in the correlation between the US dollar index and US bond yields.
7. The structural changes in capital flows are far more worthy of attention than short-term economic fluctuations.
8. The currency repatriation caused by tariff policies will continue to put pressure on the US dollar, thereby affecting the yield curve.
9. The strong performance of the AI industry in Q1 strongly supported the overall economic indicators
10. In the current era of exponential development in AI, the importance of historical experience is decreasing.

(1) Inflation Disputes and Data Trust Crisis

Anthony Pompliano: The market was once worried about tariffs, economic recession, and even a Great Depression, but April data shows that consumption remains strong, some goods are decreasing in price, and inflation is easing. The stock market has quickly rebounded; does this mean the alarm has been lifted? How do you view these economic signals?

Jordi Visser: With the easing of tariff issues, the policy path has gradually become clearer over the past five weeks: from a 90-day delay in imposing tariffs on Chinese products to a phased increase in tax rates, the overall trend is now reasonable, mostly maintaining around 10%, close to the level recognized by Druckenmiller.

This makes the divergence in economic data more apparent: business sentiment (soft data) remains sluggish, but the “hard data” driven by consumption and AI investment shows robust performance. Although consumption is temporarily affected by market fluctuations, the AI industry has strongly supported the economy.

Therefore, the S&P 500 rally has its justification. Despite many pessimistic expectations, the stock market has risen during the year, and recession predictions have not come true. In fact, the traditional definition of recession is no longer applicable to today’s complex and resilient economic structure.

Anthony Pompliano: Current economic data is showing a clear trend of politicization. How should we look for reliable reference indicators? In economic analysis, should we reevaluate the reference value of such politicized data?

Jordi Visser: In the current environment, the Bitcoin community has unique advantages. In the era of social media, people are more easily exposed to information that aligns with their own views, and many macro analysts attract attention by pessimistically predicting the market. However, Bitcoin holders, having long been rejected by the mainstream, have developed the ability to question authority and think independently.

In the context of the accelerated development of AI, the importance of historical experience is diminishing. For example, drawing parallels with 19th-century tariff policies is no longer relevant; modern information spreads rapidly, and rumors such as port vacancies can quickly amplify people’s panic about inflation, making rational judgment more difficult.

The core advantage of Bitcoin holders is understanding “cognitive humility.” The current macro essence is that there is too much debt, and the government cannot cope with it through increasing taxes or cutting spending; ultimately, it can only resolve it through currency devaluation, which will weaken bond values but benefit Bitcoin. The key is to discern the truly important signals amid the noise on social media.

(2) The Comeback of Bitcoin: From Fringe Asset to Market Leader

Anthony Pompliano: The advantage of Bitcoin holders lies in their “cognitive gap”; acknowledging their lack of understanding of traditional finance enables them to accept new paradigms more readily. Bitcoin is not an IQ test, but rather a test of cognitive flexibility: the ability to break free from old thinking and recognize that we are already in a new economic paradigm.

Capital is now accelerating towards independent investors. Independent investors, retail investors, and small investors are the true dominant forces in the market. Institutions may have funds, but they often get caught up in complex strategies, such as hedging, which is essentially just arbitrage; while the retail investors’ “buy and hold” strategy is simpler and more effective, having been validated multiple times in cases like Tesla, Palantir, and GameStop.

In the context of currency depreciation, the simplest “buy and hold” strategy often outperforms sophisticated financial engineering.

Jordi Visser: The “Fed put” theory long upheld by Wall Street is undergoing a fundamental transformation. Traditional financial crises often form a U-shaped bottom (slowly hitting the bottom and then recovering), but now the market is showing an I-shaped straight rebound (immediate recovery after a crash).

There are two main reasons behind this:

1. AI reshapes the economic structure, the widespread adoption of flexible employment makes large-scale unemployment unlikely, and the traditional recession model becomes ineffective;
2. Recession has become a policy choice, with the government using inflationary policies to counteract the deflationary pressures brought about by technology, balancing the economy between technological deflation and policy inflation.

Bitcoin investors can see through this trend due to two points of understanding:

• Understanding that the essence of “Federal Reserve put options” is continuous currency devaluation;
• High-frequency trading trains your mindset to make calm decisions under pressure, like a poker player.

Anthony Pompliano: How to identify valid economic signals when market consensus diverges from actual trends? When authoritative judgments consistently deviate from market reality, what are the true leading indicators?

Jordi Visser: I believe the stock market will still be volatile this year, but corporate earnings will grow and the economic fundamentals will remain stable.

Paul Tudor Jones turned bearish before the easing of tariffs between the US and China, and Steve Cohen also predicts a 45% probability of recession, suggesting the market may pull back. However, be cautious: when well-known investors are bearish, it may be because they missed the rebound and are trying to guide market sentiment.

I do not believe the market will retest the bottom due to the unique financial model of the AI industry: although tech giants plan $300 billion in capital expenditures, they only need to amortize $30 billion this year. This “revenue upfront, costs deferred” model has provided short-term profit space for the S&P 500. A similar situation occurred in the early days of cloud computing and the internet, but the difference now is that tech companies have lower debt.

In the long term (2-3 years later), when Mag7 companies need to deliver real returns, challenges will emerge. Sequoia points out that startups are gradually eroding the market share of giants. It is expected that after the market reaches a new high, it will face pressure, but it will not return to the low point in the short term.

(3) AI Revolution: The Power to Reshape Economic Rules

Anthony Pompliano: When AI startups dare to challenge industry giants, aren’t these “choices of rivals” the most powerful endorsement of value?

Jordi Visser: Based on the latest data disclosed by Stripe, AI programming tools represented by Cursor have achieved an annual recurring revenue of 300 million USD, driving a structural transformation in the software development paradigm alongside innovative products like Replit and Windsurf.

Although AI cannot yet replace the top 2% of programmers, it has already been able to replace 80% of basic coding work, and this percentage continues to rise.

The impact of technological change can be likened to offensive strategies in football: startups only need to break through a few “defensive lines,” while large enterprises are constrained by their architecture, inertia, and compliance, making transformation costs higher. This structural difference is the key variable in explaining the efficiency divergence of corporate digital transformation.

In particular, mid-sized companies ($3–$2 billion) face a dilemma: they lack start-up flexibility and scale, and 63% of companies are saddled with floating-rate debt, which is significantly under pressure in an environment where inflation remains at 3.2%. This “middle-tier dilemma” highlights the structural costs of the technological revolution.

Looking ahead to 2024–2029, S&P 500 companies will face the positive impact of emerging tech companies. Will these disruptors still follow the traditional IPO route? Compared to the old-school economists who merely talk the talk, entrepreneurs on the front lines are clearly more qualified to answer this question.

Anthony Pompliano: In the context of accelerating productivity release, is there still a basis for being bearish on assets in the next three years? Can the market’s pessimistic sentiment really hold up?

Jordi Visser: Market historian Russell Napier points out that changes in the structure of capital flows are the real key, compared to short-term economic fluctuations. Tariff policies are driving the return of the dollar, which will continue to suppress the dollar, thereby affecting the yield curve.

In the AI-driven new economic landscape, the stock market exhibits two main characteristics: the top 10% of the population contributes half of the consumption, combined with massive assets and transfer payments, resulting in strong consumption resilience; at the same time, the $300 billion in AI spending boosts profit margins and drives infrastructure investment. Traditional recession warning models are becoming ineffective.

Although some small and medium-sized enterprises are under pressure, the overall market is more likely to move sideways than sharply, and the biggest risk is that it will not outperform inflation. In this technology-driven era, ignoring the productivity revolution brought about by AI can lead to missing out on important investment opportunities.

(4) The Hedging Logic of Debt, Interest Rates, and Bitcoin

Anthony Pompliano: Why does Bitcoin always manage to adjust its price first before the geopolitical situation is fully clarified?

Jordi Visser: In the current economic policy environment, institutional adoption of Bitcoin is accelerating. Sovereign wealth funds and government agencies continue to increase their holdings, and people are finally starting to see them as a necessary part of asset allocation, as they have unique value due to their low correlation with traditional assets. Bitcoin showed resilience when the market fell and was the first to recover before the stock market rebounded.

However, the second half of the year may face the risk of rising interest rates due to issues related to debt deficits. The yield on 30-year government bonds has approached a 20-year high, which is directly related to the return of capital to Asia and the deterioration of the U.S. fiscal situation. When the yield on 10-year government bonds breaks through the 4.8%-4.85% range, the correlation between stocks and bonds may change. Pension funds have achieved sufficient capital due to rising interest rates and may increase their bond allocation, thereby continuing to push up long-term interest rates.

Anthony Pompliano: What do you think the 10-year U.S. Treasury yield needs to reach? From a policy and economic perspective, should this ceiling be below 4%, or even lower? What should the yield standard that truly represents “policy success” be?

Jordi Visser: The core driving factors of Bitcoin price movements are the changes in the correlation between the US dollar index and US Treasury yields. The current market shows structural differentiation: although US stocks continue to rebound, the range of fluctuations in the US dollar index is narrowing, while the federal funds rate remains high. This state of divergence is difficult to sustain in the long term.

As interest rates continue to rise, the default rates on consumer credit and housing mortgages in the United States have climbed to cyclical highs. Against this backdrop, policymakers may be forced to introduce housing market rescue measures. While the likelihood of directly implementing quantitative easing is low, the possibility of introducing targeted liquidity support measures similar to those seen in the Silicon Valley Bank incident cannot be ruled out.

In the new economic paradigm driven by AI technology, the impact of rising interest rates on the technology industry shows significant differentiation. Leading tech companies known as Mag7 (specifically referring to seven tech giants like Microsoft, Apple, and Nvidia) are basically immune to financing cost pressures, and companies in the AI sector also demonstrate strong profitability resilience. This structural difference provides a foundation for a potential short squeeze in Bitcoin.

Anthony Pompliano: For AI companies, higher interest rates may actually bring greater competitive advantages, but their competitors face higher capital costs.

Jordi Visser: The current economy is showing structural differentiation, with bankruptcies of traditional companies coexisting with the growth of startups. Traditional enterprises are being forced to exit due to rising financing costs, while AI startups are rapidly emerging, reflecting an improvement in resource allocation efficiency. However, whether this transformation is healthy still requires vigilance against potential structural risks.

The key lies in judgment: Is this a benign market self-regulation, or is there a hidden systemic crisis? Whether the decline of traditional industries can match the growth pace of emerging sectors will determine the sustainability of this round of transformation.

(V) Creative Destruction: The Survival Rule in the AI Era

Anthony Pompliano: How to assess the quality of the current economic adjustment? Are the resources of eliminated companies effectively transferred to more innovative and efficient emerging businesses?

Jordi Visser: From a micro perspective, corporate bankruptcies can indeed lead to job losses and interruptions in household income, which are social costs; however, from the perspective of macroeconomic operation mechanisms, this process of survival of the fittest is akin to organizational optimization of enterprises and is a necessary way to maintain market vitality and promote industrial upgrading. This is essentially the essence of economic recession, and creative destruction is happening.

A career break can also be an opportunity for skill enhancement. Last year, after the hedge fund closed, I chose to start my own business, turning to AI learning and Python programming to achieve a career transformation. This shows that as long as there is time invested, even at 58 years old, continuous learning can break age barriers and open up new career paths. For job seekers, mastering AI skills will significantly enhance their competitiveness.

Anthony Pompliano: The Trump team has secured trillions in investment commitments in the Middle East. Although these may not be realized in the short term, the U.S. is still seen as an open market against the backdrop of tax increases. Do these countries view the U.S. as a partner or a rival? Is this perception important for economic development?

Jordi Visser: A cautious attitude should be maintained towards any phased disclosure of fundraising data. The U.S. net international investment position has reached negative $27 trillion, and this verifiable data indicates that global capital has deeply intervened. If the dollar continues to depreciate, U.S. productive assets held overseas will face systemic devaluation risks.

The current debt and fiscal deficit issues lack effective solutions, and the weakness of the US dollar will show progressive characteristics. Although the Federal Reserve has not restarted quantitative easing, it is only reducing the reinvestment scale of maturing bonds by $5 billion per week. This “nominal tightening” policy is inherently consistent with the strategy of Asian and European investors gradually reducing their holdings of US Treasury bonds—maturing funds may not be fully reinvested.

What is more值得关注 is the global competitive landscape of the AI industry. The technological advantage of American startups is facing global competition, while European developers are fully capable of developing products similar to Cursor and Replit. If the market position of Mag7 companies is shaken, the global income redistribution will trigger a reconstruction of capital flow patterns, and this structural change is far more strategically significant than the short-term scale of capital inflow.

Disclaimer

The content of this article does not represent the views of ChainCatcher, and the opinions, data and conclusions in this article represent the personal position of the original author or the interviewee, and the compiler maintains a neutral attitude and does not endorse its accuracy. It does not constitute advice or guidance in any area of expertise and should be used with caution based on independent judgment. This compilation is limited to the purpose of knowledge sharing, and readers are requested to strictly abide by the laws and regulations of the region where they are located, and not to participate in any illegal financial behavior.