Assets Are Going Higher Because Trust Is Falling

To investors,

Citadel’s Ken Griffin dropped a harsh truth in an interview with Bloomberg yesterday:

“We’re seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarize, or de-risk their portfolios vis-a-vis US sovereign risk.”

It is not every day that you see one of the world’s best investors say people are de-dollarizing their portfolio. Why would they want to de-dollarize? Goldman Sachs says the story is simple:

“Trump said America can “grow its way out of debt.” What it really means is debasement. Shutdowns highlight the erosion of trust in U.S. institutions — Bitcoin is the pressure valve. That’s not bearish S&P, it’s bearish dollar.”

Those are the magic words — erosion of trust in US institutions. People don’t trust the government. They don’t trust the news. And they definitely don’t trust the central bank. Why should they? Those three organizations have proven to be untrustworthy over the last decade.

One of my favorite Satoshi Nakamoto quotes is “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

Ain’t that the truth. Satoshi knew the problem earlier than most.

We are now seeing large amounts of capital flow to safety from this breach in trust. The crypto market saw $6 billion of inflows last week, which is an all-time high.

How should we think about these inflows? Should we assume this is speculation from investors looking to capture a quick profit? Or is there something much bigger at play?

End Game Macro says “this $6 billion inflow into crypto is a warning signal. Big money is moving because confidence in the global financial system is starting to fray. Historically, surges like this have appeared when investors begin losing faith in traditional credit markets. What makes this moment different is the context: global growth is slowing, debt loads are exploding, and the risk of a major credit event, something breaking in the bond or banking system is rising fast.”

Confidence is starting to fray. Trust is eroding.

This leaves citizens with a simple choice…stay trapped in the existing system and suffer whatever consequences come from the undisciplined decisions of leadership or take your assets and move them into a parallel system that was purpose-built to mitigate these disastrous policies.

That is the choice in front of investors — stay and suffer or leave and prosper.

It doesn’t seem like a hard choice to me. But here is the beautiful part about capitalism, everyone is financially incentivized to move to where their money will be treated best. First it was the individuals. Then we saw the small businesses and private companies. Next it was the public companies, which were followed by the large financial institutions. Eventually we will see the central banks and nation states.

Every dollar, every unit of economic value. It is all going to move into the new system and new assets. Some of the adoption will happen by true flight from the old system into the new system. Some of the adoption will happen by bringing the new assets into the legacy system via existing wrappers.

Regardless of how it happens, it could not be more clear that the transition is underway. The next decade will be defined by this trend. I implore you not to ignore it.

Hope everyone has a great day. I’ll talk to you tomorrow.

- Anthony Pompliano

Founder & CEO, Professional Capital Management

Former Chairman of the House Financial Services Committee On Bitcoin

Jeb Hensarling is the former Chairman of the House Financial Services Committee and one of the most influential voices in economic policy during the 2008 financial crisis. He has also joined ProCap BTC as a Senior Advisor.

In this conversation, we talk about how Jeb pushed back against the bank bailouts, how those same issues led to the rise of bitcoin, his views on bitcoin, stablecoins, the broader crypto industry, and how technology and innovation are reshaping the financial system today.

Enjoy!

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