That bonds are the perfect assets on which you can't lose money.

Bonds are no longer the safest investment, and data proves it!

This assertion goes against everything your financial advisor has ever said, but today, we'll question those assumptions; we provide the data, and you can reach your conclusions.

Are you ready to fire your financial advisor? Let's go!

TLDR 📃

• The U.S. government prints new bonds, driving down the value of each unit.
• Bitcoin reaches the highest price in a year relative to 30-year US bonds.
• Fitch downgraded the U.S. credit rating from AAA to AA+.
• SEC asks Coinbase to delist every asset except BTC, claiming they’re all securities.

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your full responsibility.

U.S. turns on the money printer; bonds set to crash 🖨

The “brrrr” is back as the money printer kicks off again in full force. The U.S. government created money out of thin air when it sold off new bonds last week.

This rapid inflow of new bonds sets off a chain reaction in the market. 

Bond yields often increase as new bonds enter the market to counteract the price drop. And that’s where the yield matters. Yield represents the annual interest payments countries make to bondholders. An increase in yield signals the necessity to attract investors with a higher rate of return.

This higher yield doesn't exist in isolation; it plays a pivotal role in perpetuating a continuous increase in the money supply. Year after year, the rising yield brings more money into the system. 

This ongoing process gradually erodes the value of bonds, undermining their status as supposedly secure safe-haven assets.

Interestingly, while the bond market faces these challenges, Bitcoin's value moves in a different direction. As bond values fluctuate, Bitcoin’s worth rises, reaching its highest price in a year compared to the value of 30-year bonds priced in BTC. 

This surge in Bitcoin's value is a function of its scarcity, which contrasts sharply with the increasing money supply associated with the bond market.

In maths, we trust; not the U.S. government 🪨

If you trust the U.S. to pay those bonds back, think twice. 

Bonds are loans to governments, and the U.S. government just got a credit downgrade! 

Fitch, one of the “Big Three” credit rating agencies, brought the U.S. down from a AAA rating to an AA+, indicating that the U.S. is becoming an unreliable creditor.

Today, about 30% of the U.S. budget comes from printing bonds (i.e. new money); the other 70% is from taxes. This is already a problem, as the U.S. budget has increased by almost 50% since 2019!

But it gets even worse if the Fed has its way and interest rates slow the economy down. The share of taxes contributing to the budget will bleed further, and the government will need to print more money to make up the difference. Just look at the explosive growth in federal spending.

Investing in bonds is based on trust – in the government issuing the bond. 

Investing in BTC is based on unchanging mathematical principles. The supply of Bitcoin is not subject to human feelings; code is law, and there’ll only ever be 21 million BTC minted.

This proves that BTC is the safest investment on a longer time horizon. 

U.S regulators become more crypto-friendly 🫂

Meanwhile, BTC has become the SEC’s favourite currency. Yes, that SEC.

Gary Gensler asked Coinbase to delist every cryptocurrency it offers - except for Bitcoin. The SEC claimed that every other token but BTC is a security. We wonder how much the flurry of recent ETF applications impacted this drastic shift, but it’s a welcome change.

Prosecutors pursuing a case against Binance also softened their tone this week, considering lesser charges to avoid a bank run. They acknowledged that such an event could cause a catastrophe on the scale of FTX, and they wanted to protect “consumers.” 

BTC price analysis 📊

Since being rejected at $32,000, Bitcoin has seen a boring and downward movement to the bottom of the region at $28,750. Although things have been quiet for a few weeks, we believe the market is ready to pop.

The deal is simple - BTC's price now has two options left out in the open:

1. BTC bottoms at $28,750, ranges for 1-2 weeks, then off to $32,000 and above we go!
2. BTC loses $28,750 as support, the market sees more downside, and the chance of a rally is demolished.

Now, one of both scenarios has a higher chance of occurring - and that's BTC bottoming and then breaking out.

BTC has a decent chance of heading towards $28,750, so start shopping- prices are about to go off.

Cryptonary’s take 🧠

We expect the blowout in the bond market to drive sustained demand for BTC. The classic savings strategy of putting money into bonds is showing its weakness. Investors burned by declines in bond values will likely seek investments that don’t share the same downsides. There’s only one clear option – Bitcoin.

Regulators becoming best buddies with Bitcoin positions BTC even more favourably. There are now fewer reasons for traditional finance players to stay away from Bitcoin, but there are more reasons to think twice about investing in bonds.

If they haven’t already, investors will soon discover that BTC is the ONLY currency in the world with a hard limit on its supply. Are you bullish yet?

As always, thanks for reading! 🙏

Cryptonary, out!