5-Min Monday Macro, Crypto & AI: #69, 13th Jan

Uncertainty causing fear in every markets, everyone awaits Trump's inauguration, stocks and crypto decline massively

Hey!!!! It’s Monday again. Welcome to another fantastic week!

I spend hours reading, researching, and talking to the smartest founders and investors in macro, crypto, and AI every week. This is my attempt to give you a short 5-10 minute summary on how I am thinking about the macro and crypto markets and what lies ahead. Hundreds of hours summarized, so you don't have to.

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Novelist Ernest Hemingway on acting with confidence while living with humility: "Be humble after but not during the action."

Source: The Art of the Short Story, The Paris Review​ Via James Clear

TL;DR

1. Zeitgeist - Animal spirits reined in, amid massive uncertainty as Don Trump takes over

2. Macro - Inflation is stubborn, jobs are wobbling, and Hitman Powell shifts from "dovish" to "hawkish caution."

3. Stocks, Bonds, Fx - Uncertainty

4. Crypto - Bloodbath continues as US Govt sells (or does it?)

5. AI - Unstoppable

The Market Zeitgeist

Uncertain and Unpredictable

December offered a valuable opportunity to pause, reflect on the past year, and chart a course for maximizing success in 2025. As we look ahead into this week, here are the key observations shaping the current economic narrative:

1. Powell's Ever-Changing Playlist
   Jerome Powell’s comments from December spooked the markets that have since gone on cataclysmic path amidst fears of about constrained monetary policy in 2025. However, staying worried might be futile—Powell’s shifts in rhetoric are as unpredictable as a wedding DJ’s playlist. Just when you’re swaying to a slow romantic tune, he flips the script with a wild techno drop, leaving everyone scrambling to keep up. The lesson? Stay flexible and ready to dance to whatever UNCERTAIN beat emerges.

2. Inflation and Political Intrigue
   Inflation remains a persistent thorn in the global economic landscape, while geopolitical theatrics continue to raise eyebrows, Trump has reignited his usual fireworks, this time with bold musings on tariffs and even the concept of “country acquisitions.” These developments only add to the sense of unease, leaving markets feeling like passengers on a ship tossed by UNPREDICTABE political waves.

3. The Dollar's Dominance and Yield Pressures
   The U.S. dollar has flexed its muscles, with the DXY surging to 110 and bond yields climbing to 4.85%. These developments, while beneficial to dollar bulls, create headwinds for risk assets. The market environment has become a UNCERTAIN tightrope walk where every step requires impeccable precision.

   

4. Risk Assets Face the Heat
   Stocks and cryptocurrencies are struggling to find their footing, weighed down by the dual pressures of a robust dollar and elevated yields. The situation feels akin to a marathon runner trying to sprint uphill while carrying a backpack full of bricks—progress is possible, but it’s anything but smooth amid so much UNCERTAINTY.

5. Finding Light in the Tunnel
   Despite the challenges, it’s vital to adopt a broader perspective. As the saying goes, the darkest hours often precede the dawn. By looking beyond the immediate noise and focusing on the bigger picture, there is hope to uncover opportunities in the current market turbulence.

That is about to change IMO as I wrote in our TG channel this morning. Trump cannot let DXY continue to rise and yields soar.

This seems like the perfect moment for Trump to dial down the rhetoric—a strategic move that could lend stability to the markets. That’s why his inauguration feels like more of a “buy the news” scenario, in my view. February holds the potential to be a standout month, likely driving the bulk of Q1 gains.

March, however, brings a different narrative as we wade into tax season. The optimism of early Q1 might give way to a more cautious tone, as financial realities come to the forefront. It’s a reminder that while the markets thrive on anticipation, they also have to grapple with the inevitable.

Few weeks ago we wrote (and I hope you followed)

So Is it time to take profits?

The short answer: Yes. It is always prudent to book some profits when markets have risen exponentially and there is Euphoria everywhere. When markets feel as taut as a high-wire act, and sentiment among funds is overwhelmingly bullish, it’s wise to pause and ask, “What’s my downside here?” Especially when figures like Michael Saylor seem to be playing financial engineering, you have to wonder where the risk really lies.

Uncertainty Amidst Rising Yields and a Surging Dollar

Since Powell’s latest address, uncertainty has thickened like fog over the markets. Longtime readers of Hashtalk will recall our consistent advice: Q1 was always going to be a time to take some profits and tread carefully.

Here’s the harsh reality:

Uncertainty → Fear → Liquidity Drain → Risk Assets Decline

1. Sticky Inflation and a Stubborn Fed
   Inflation remains persistently high, tying the Federal Reserve’s hands. While the market longs for rate cuts, Powell isn’t budging much, restrained by the twin threats of sticky inflation and alarming deficits. Rising DXY and yields are compounding the problem, tightening liquidity and applying pressure across the board. The market can only "climb a wall of worry" for so long before the fear trade takes over—and that’s where we are now.

2. Yields: The Silent Market Killer
   Persistent high rates, particularly long-term yields, are the invisible wrecking ball swinging through the economy. The 10-year yield touching 4.85% is a wake-up call: higher interest costs for the government, pain for commercial real estate, and an ominous refinancing wave for mortgage holders. These resets will feel like running into a brick wall at full speed, leaving few unscathed.

3. Global Reverberations: The Bond Vigilantes Strike
   This isn’t just a U.S. phenomenon. Across the Atlantic, the UK and Europe face even more dire circumstances. Falling currencies, surging yields, and a reawakening of bond vigilantes are wreaking havoc on already fragile economies. The pound and euro are under siege, and the cracks are widening.

4. Risk Assets Under Pressure
   The correction has begun, and history tells us these downturns often go deeper than expected. Just look at NVIDIA—despite promising news from CES, the stock is down 10% in the face of rising yields. Risk assets are like hikers caught in a wildfire: there’s no water left to douse the flames, as governments have already drained the reservoirs. Now is not the time to chase perceived floors—wait for clear signs of reversal, which remain elusive.

5. Patience is Key
   Whether this correction lasts one week, one month, or six months is anyone’s guess. What’s clear is that rushing into the flames without a solid plan is a recipe for getting burned. In this environment, the best strategy is to preserve capital, stay vigilant, and let the market dictate when it’s time to reenter.

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Trump Stirs the Pot with More Uncertainty

The Trump administration has once again unleashed a wave of uncertainty, this time with the looming specter of tariffs. Markets are grappling with the unknown, as no one can predict the next move in this game of economic brinkmanship.

The equation is clear:

Tariffs → Rising Costs in the U.S. → Inflation → Higher Bond Yields → Fewer Rate Cuts → Pressure on Stocks and Risk Assets

Here’s how the tariff scenario might unfold:

1. Option 1: The Shock-and-Awe Strategy
   Trump could surprise the world with sweeping, massive tariffs. While this isn’t my base case, such a move would send the markets into a tailspin. The DXY would skyrocket, while emerging markets would feel the pain and likely “scream” louder than a child denied dessert. It would be chaos, pure and simple.

2. Option 2: The Gradual Sword (Base Case)
   A more likely approach is a gradual or targeted implementation of tariffs. Trump might selectively apply increases to specific categories, keeping markets in a perpetual state of uncertainty. This is like living under the constant threat of a sword hanging by a thread—nerve-wracking and difficult to navigate. Trading in such an environment would feel like playing chess on a moving train.

3. Option 3: The Art of the Bluff
   Alternatively, Trump could do what he does best: keep everyone guessing. By issuing threats without immediate action, he may seek to unsettle adversaries and buy time. This would mirror his previous presidency, where summer surprises were the hallmark of his tariff strategy. In essence, it’s the geopolitical equivalent of tossing a lit firecracker into the room just to watch people jump.

While the outcome remains unclear, what’s certain is that the markets despise uncertainty, and Trump’s tariff talk adds fuel to an already volatile environment. The best course of action? Stay nimble, expect the unexpected, and avoid getting caught flat-footed when the next move arrives.

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GLOBAL MARKETS

Trumps Tariffs Tango & Canada’s Tightrope Walk

1. Trump’s Tariff Gambit
   Whether it’s bluff or action, Trump’s tariff threats are shaking markets. Canada is caught in the crosshairs, teetering like a curling stone headed for disaster. Yesterday’s press conference doubled down on autos and lumber—because why not kick them while they’re down?

2. Debt-Fueled Fragility
   Canada’s household debt-to-income ratio is among the highest in the developed world—a powder keg waiting for a spark. Add shaky GDP growth and a softening job market, and the economy looks as sturdy as maple syrup on a hot griddle.

3. Bank of Canada’s Limited Toolbox
   Rate cuts are already in play, but slashing rates can only do so much when debt levels are sky-high. It's damage control at best, not a cure.

4. Political Chaos
   Trudeau’s resignation, a prorogued parliament, and no election until spring leave Canada rudderless. If Trump imposes broad tariffs, the CAD could tumble faster than political approval ratings.

Meanwhile, the malaise is spreading globally: UK bond yields are soaring, China faces rising internal tensions, and Trump’s rhetoric is throwing gasoline on the fire. It feels like the world is bracing for his January 20 inauguration, hoping for clarity but expecting chaos.

Few weeks ago, we wrote:

Canada’s economy appears to be skating on thin ice, and the cracks are starting to show. With the looming threat of U.S. tariffs, rising household debt, and a weakening job market, the outlook is anything but rosy. While some may hope Trump is bluffing, the mere mention of tariffs is enough to rattle investors. Here’s a closer look at the key risk factors driving this narrative

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China’s Mystery Play: Stimulus or Smoke and Mirrors?

China’s economy seems trapped in a downward spiral, caught between a balance sheet recession and a deflationary undertow. Their latest move? Halting bond purchases—an attempt to suppress deflationary signals. It’s akin to sticking a thermometer into ice and expecting the temperature to rise.

Here’s the situation:

1. Uncertainty Is the Only Certainty
   No one knows what Beijing is up to, and that’s creating even more turbulence. Slowing global demand and Trump’s tariff antics are piling on the pressure, leaving China at a crossroads: act decisively or watch the slowdown deepen.

2. Liquidity on the Horizon
   Stimulus isn’t a matter of “if” but “when.” With growth softening and trade wars raging, China will likely have no choice but to unleash a liquidity flood. For now, though, markets are holding their breath like kids waiting for fireworks—except no one’s sure if it’ll be a dazzling display or a damp squib.

3. Yields Falling Faster Than…
   Chinese yields are plummeting faster than a lead balloon—or perhaps faster than the yuan when tariffs hit. This signals the pressure building under the surface, and the markets are bracing for what comes next.

In summary, China’s next move is as mysterious as its economic data. Stimulus is almost inevitable, but until it materializes, markets will be left guessing. Stay tuned—it’s shaping up to be quite the economic drama.

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DATA TO WATCH

• January 15 - U.S. Consumer Price Index for November

• January 15 - U.S. Retail Sales

• January 29 - U.S. FOMC Interest Rate Decision

• January 31 - BTC CME December (BTCF25) Options Expiry

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MACRO SUMMARY

Massive uncertainty amidst hawkish FED, Trump’s inauguratory remarks, rising yields and a global economy that is shaky at best.

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STOCKS, BONDS & FX

The Two Titans of the Stock Market—and They’re Stumbling

In today’s markets, it all boils down to two names: NVIDIA and Tesla. These aren’t just stocks; they’re the heartbeat of the modern financial ecosystem. Whether you’re a casual investor or a seasoned pro, chances are you’re exposed to these titans—directly or indirectly.

Here’s why their movements feel like seismic shifts:

1. The Market Movers
   NVIDIA powers the AI revolution, and Tesla electrifies the future of transportation. Together, they’ve become the policymakers and trailblazers of modern markets. When their respective overlords—Jensen Huang and Elon Musk—speak (or tweet), markets react like tuning forks hit by a hammer.

2. Policy Pressure: Trump’s Shadow Looms Large
   Both companies are deeply tied to geopolitical dynamics, especially U.S. trade policies. Case in point: Trump’s latest export curbs on NVIDIA chips. These restrictions hit harder than a curveball, sending shares of NVIDIA and AI-dependent companies like Palantir tumbling.

3. A Ripple Effect Across Markets
   The fallout isn’t contained. As of Monday evening (Asia time), NVIDIA and Palantir are both down over 3%, following last week’s 6% slide. Tesla, Broadcom, and Micron have also felt the premarket jitters, highlighting just how interconnected and fragile the tech ecosystem has become.

It’s a stark reminder that when these two giants stumble, the rest of the market feels the aftershocks. In a world where tweets and trade policies can shake billions, staying nimble is the only way to survive.

Meanwhile, Howard Marks had a brilliant (and timely) piece this month on formation of bubbles that has been doing the rounds. A must read. Here is the link.

ITS ALL ABOUT BONDS AND YIELDS

Persistent Higher Yields: A Brewing Storm

Rising yields are becoming a significant thorn in the side of the economy, and the ripple effects are starting to surface. From homeowners to corporations, the pressure is building. Here’s what’s unfolding:

1. Mortgage Resets: A Ticking Time Bomb
   Persistent high yields mean many mortgages are on the verge of resetting, and the impact will hit households like a surprise rent hike on payday—unwelcome and unavoidable.

2. Corporate Debt Rollovers: Crunch Time
   Corporations facing maturing debt will soon find themselves paying a premium to refinance. It’s like upgrading your phone plan only to discover the “new deal” costs twice as much.

3. Trump's Potential Yield Intervention
   My take? Trump won’t let yields spiral unchecked. Expect bold moves from the Fed and Treasury to rein them in—think of it as economic CPR for a heart attack they’d rather avoid.

4. China’s Bond Exodus: Adding Fuel to the Fire
   Complicating matters, countries like China continue to offload U.S. bonds. The latest data suggests their selling spree hasn’t slowed, making it harder to control the rising yield tide.

High yields are squeezing consumers, corporations, and policymakers alike. It’s a precarious dance, and every misstep risks turning the tension into a full-blown economic storm. Buckle up—this show is just getting started.

The UK’s Toxic Cocktail: High Yields and a Weak Pound

The UK is showcasing a dangerous economic blend: rising yields paired with a weakening currency. It’s like driving uphill with the brakes on—both forces working against economic stability.

1. Higher Yields
   Elevated bond yields are increasing borrowing costs across the board, putting pressure on households, businesses, and the government alike. It's a clear sign that markets are pricing in more risk.

2. Lower Currency
   The pound’s decline is amplifying import costs, fueling inflation, and leaving the Bank of England in a bind. A weaker currency should theoretically help exporters, but the benefits are muted in a slowing global economy.

3. A Toxic Mix
   Together, high yields and a depreciating pound create a feedback loop: higher borrowing costs strain growth, while a weaker currency exacerbates inflation. It’s a one-two punch that risks turning economic jitters into a full-blown crisis.

The UK’s current predicament serves as a cautionary tale for policymakers everywhere—balancing these forces is no easy feat, and missteps could prove costly.

DXY IS CREATING FX RIPPLES IN EMERGING ECONOMIES

The dynamics of the U.S. Dollar Index (DXY) and its relationship with macroeconomic factors like tariffs and interest rates are indeed central to the outlook for the greenback, especially as political and economic announcements loom. Here's a breakdown of the potential scenarios based on your analysis:

1. Large Blanket Tariffs: If large, broad tariffs are introduced (3%–5% on various imports), this would likely push DXY higher in the short term due to increased uncertainty and trade tensions. However, a dramatic increase in tariffs—especially a 20–25% levy on Canada and Mexico—would have a much more severe impact, not only on these neighboring economies but also on the broader emerging market economies, potentially causing a significant DXY rally. The rise in DXY would reflect heightened risk aversion and capital flight to the safety of the U.S. dollar, making this a dangerous scenario for global trade.

2. Targeted Tariffs: A more measured approach, focusing on specific countries or sectors, could initially boost the DXY but would likely lead to a selloff in the medium term. Tariffs on specific industries might result in market volatility as investors digest the implications. The DXY could experience a choppy movement, with fluctuations as traders anticipate the long-term consequences of such selective tariff policies.

3. Sector-Specific Tariffs: Introducing tariffs on select sectors (as opposed to broad tariffs) would likely have an immediate negative effect on the DXY. The uncertainty surrounding these specific measures could prompt a 1%–3% selloff in the dollar, particularly as the administration takes control and begins implementing policies. This could lead to further downward pressure as markets adjust to the new trade landscape under a possibly less predictable trade policy.

This framework hinges on Trump's post-inauguration announcements, as his policy stance and actions regarding tariffs will significantly influence both market sentiment and the strength of the U.S. dollar. What are your thoughts on how these scenarios might unfold in relation to U.S. economic growth and inflation expectations?

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CRYPTO

BTC Down to $90K on the back of Macro Uncertainty, Stocks Mayhem & USGov Selling Rumour

I will like to submit a formal complaint about this bull market, where is the manager when you need them?

Bitcoin is experiencing a massive sell-off today, with a sharp drop to $90K, largely fueled by macroeconomic uncertainty, stock market turmoil, and the persistent rumors surrounding potential U.S. government Bitcoin sales. It's beginning to feel like déjà vu—like the August 5th sell-off all over again. Deja Vu with a side of stress.

Adding to the volatility is the uncertainty around the rumored sale of 6900 BTC (~$6.5 billion) by the U.S. government. Whether or not this sale has actually occurred is anyone’s guess, but the mere perception that it might is certainly contributing to the weakness in the market. That said, even in the face of such turbulence, Bitcoin is holding strong above $90K, which, I’d argue, is pretty impressive under the circumstances. It's like watching a gladiator stand tall after a hard-fought battle—bloodied but unbowed.

In my view, the core issue here is the broader macroeconomic uncertainty, with equities in free fall and all eyes on government action. The situation mirrors what we saw when Trump took office—when the markets reacted with similar anxiety, only to eventually reverse course. Based on historical trends, once Trump settles in and we see a shift in the DXY and a topping out of yields, the market is likely to find its footing again.

On a historical note, February has historically been a strong month for crypto in post-halving years. If that pattern holds, we may be on the brink of a recovery, provided we can weather the storm for just a bit longer.

Don’t let the negative noise from crypto Twitter spook you into dumping your USD positions. Yes, there’s a collective “OG PTSD” that lingers, but the key is to stay calm and avoid leverage. Remember the sage advice of Warren Buffett: “Be greedy when others are fearful.” This is a prime opportunity to buy when blood is in the streets—and I’m not talking about an actual street fight. Be selective and look for undervalued gems.

Let’s not forget, this is the first pro-crypto U.S. president, and the Treasury Secretary has just publicly declared a significant stake in an ETF. The winds of change are blowing in favor of crypto. So, take a breath, hold your ground, and stay focused on the long-term horizon. The market is a marathon, not a sprint. The key to success here is patience and conviction.

You can't be bearish on crypto in 2025—at least not if you're looking at the long term. Sure, there might be a bit more downside ahead, but let's be real: no one has ever nailed the perfect bottom. I’m a long-term thinker and investor (with the exception of meme coins, of course). This is the time to start eyeing your favorite coins, especially if you're planning to hold for the long haul.

We're just one week away from Trump's Inauguration Day, and while we may see some volatility leading into that, there's potential for a rally if we can break through the $90K range in BTC. However, with macro news like US CPI and PPI coming up, expect some choppy waters over the next two weeks.

Now, I'm not ruling out a dip below $85K—everyone's got their eyes on that level as the 200d MA collides there —but don't let crypto Twitter’s doom-and-gloom narratives get to you. Just because some folks are calling the cycle top at $108K doesn’t mean we’ve reached the peak. It’s a bold statement, but based on BTC’s historical trends, I’d give it a 75% chance that January closes higher, even if it's a modest uptick. A reversal could come on or before January 20th, and from there, we’re likely to see another all-time high in Q1 as the pro-crypto administration starts rolling out a wave of positive news. Other countries will start taking note, and we could see global crypto adoption accelerate.

Also don‘t forget your “Savior Saylor” - mostly buying Monday evenings Asia time and if it is a sizeable purchase again, that could be a relief to this dump, followed by a rally into inauguration date.

Patience is key here, and the best opportunities often emerge during times of uncertainty. So, keep your focus on the bigger picture, and don't let short-term volatility derail your long-term strategy.

Trump's election and MicroStrategy’s (MSTR) relentless Bitcoin buying have certainly played pivotal roles in driving us to this point. While some whales are starting to take profits, primarily through ETF outflows, the market sentiment remains strong. Traders are now positioning themselves for January, and I believe we're in for a very solid quarter ahead.

That said, I’m approaching the situation with caution. The key is not to overpay, so I’m utilizing a strategy of dollar-cost averaging (DCA) through call options and spreads. This way, I can manage risk effectively while still capturing upside potential. It’s all about finding that balance—staying bullish, but with a smart, measured approach. The next few months could be very lucrative, but being too aggressive could leave you exposed. So, patience and strategic entry are crucial right now.

Massacre in ALTS as BTC Topples

I wrote a more lengthy 2025 crypto plan here.

Most recently onchain AI agent coins just had their first big innings, and are correcting now. There is a massive discount and I am eyeing conviction buys as I write this.

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Crypto x AI - The Agentic World

The differentiating factors in AI Agents come down to: 1) Quality of contextual information 2) Support for a wide range of plugins 3) Ability to fully leverage underlying LLMs 4) Integration in products

Letters #3: The Case For Agent Networks to $250b MC

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Discovered a great newsletter this week—worth a read!

Macro Mornings is a must-read if you want to understand how macroeconomic trends shape the markets and your investments. Highly recommended!

May your Monday be filled with coffee & profits.

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