Wall Street 30-Year Practitioner: The Hedging Logic of Debt, Interest Rates, and Bitcoin

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

Compiled 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, analyzing why market trends often run counter to mainstream expectations.

ChainCatcher has organized and compiled the content.

TL&DR

1. The definition of "economic recession" in traditional economics textbooks has lost its explanatory power under the contemporary economic structure.
2. The market is beginning to view Bitcoin as an indispensable part of asset allocation.
3. Continuous currency depreciation is an inevitable trend.
4. Autonomous investors, independent investors, and retail investors are the true dominant forces in the market.
5. The essence of the "Federal Reserve put option" is perpetual currency depreciation.
6. The core driving factor of Bitcoin's price movement lies in the changing correlation between the dollar index and U.S. Treasury yields.
7. Structural changes in capital flows are far more worthy of attention than short-term economic fluctuations.
8. Currency repatriation due to tariff policies will continue to pressure the dollar, thereby affecting the yield curve.
9. The strong performance of the AI industry in Q1 has robustly supported overall economic indicators.
10. As AI develops exponentially, the importance of historical experience is diminishing.

(1) Inflation Controversy and Data Trust Crisis​

Anthony Pompliano: The market has been concerned 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 retreating. The stock market has rebounded rapidly; 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 clear over the past five weeks: from a 90-day grace period for tariffs on Chinese products to a phased increase in tax rates, which now tends to be reasonable, mostly maintaining around 10%, close to the level recognized by Druckenmiller.

This has made the divergence in economic data more apparent: corporate sentiment (soft data) remains low, but consumption and "hard data" driven by AI investment are performing robustly. Although consumption is temporarily affected by market fluctuations, the strong AI industry has supported the economy.

Therefore, the rebound of the S&P 500 is justified. Despite many pessimistic expectations, the stock market has still risen this year, and recession predictions have not materialized. In fact, the traditional definition of recession is increasingly difficult to apply to the current complex and resilient economic structure.

Anthony Pompliano: Current economic data is showing a clear political bias; how should we find credible reference indicators? Should we reassess the reference value of such politicized data in economic analysis?

Jordi Visser: In the current environment, the Bitcoin community has a unique advantage. In the age of social media, people are more likely to encounter information that aligns with their viewpoints, and many macro analysts attract attention by being bearish on the market. Bitcoin holders, having long been unaccepted by the mainstream, have developed the ability to question authority and think independently.

In the context of accelerated AI development, the importance of historical experience is diminishing. For example, drawing parallels between 19th-century tariff policies and the present is outdated; modern information spreads rapidly, and rumors about 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: there is too much debt, and the government cannot respond through tax increases or spending cuts, ultimately having to resolve it through currency depreciation, which will weaken bond values but benefit Bitcoin. The key is to discern truly important signals amid the noise of social media.

(2) Bitcoin's Comeback: From Marginal Asset to Market Leader​

Anthony Pompliano: The advantage of Bitcoin holders lies in their "cognitive blankness," acknowledging their lack of understanding of traditional finance, which makes them more receptive to new paradigms. Bitcoin is not an IQ test but a test of cognitive flexibility: can one break free from old thinking and recognize that we are in a completely new economic paradigm?

Capital is now accelerating towards autonomous investors; autonomous investors, independent investors, and retail investors are the true dominant forces in the market. Institutions may have funds but often get caught up in complex strategies, such as hedging, which is essentially just arbitrage; while the retail strategy of "buy and hold" is simpler and more effective, as evidenced by cases like Tesla, Palantir, and GameStop.

In the context of currency depreciation, the most straightforward "buy and hold" strategy often outperforms sophisticated financial engineering.

Jordi Visser: The "Federal Reserve put option" theory long adhered to by Wall Street is undergoing fundamental changes. Traditional financial crises often form U-shaped bottoms (slowly bottoming out and recovering), but now the market is showing an I-shaped straight rebound (immediate recovery after a sharp drop).

There are two main reasons behind this:

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

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

• Understanding that the "Federal Reserve put option" is essentially continuous currency depreciation;
• High-frequency trading has trained their mindset, allowing them to make calm decisions under pressure like poker players.

Anthony Pompliano: When market consensus diverges from actual trends, how can we identify effective economic signals? When authoritative judgments continue to diverge from market realities, what are the true leading indicators?

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

Paul Tudor Jones turned bearish before the easing of U.S.-China tariffs, and Steve Cohen also predicts a 45% probability of recession and a market correction. But we should be cautious: when well-known investors turn bearish, it may be because they missed the rebound and are trying to guide market sentiment.

I do not believe the market will test the lows again, as the unique financial model of the AI industry plays a role: although tech giants plan $300 billion in capital expenditures, they only need to amortize $30 billion this year. This "revenue upfront, costs deferred" model provides profit space for the S&P 500 in the short term. Similar situations occurred in the early days of cloud computing and the internet, but the difference now is that tech companies have lower debt levels.

In the long run (2-3 years from now), 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 new highs, it will come under pressure, but it will not return to the lows in the short term.

(3) AI Revolution: The Power to Restructure Economic Rules​

Anthony Pompliano: When AI startups dare to challenge industry giants, aren't these "choices of opponents" the most powerful endorsements of value?

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

Although AI cannot yet replace the top 2% of programmers, it can already substitute for 80% of basic coding work, and this proportion continues to rise.

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

Especially for medium-sized enterprises (with a market value of $300 million to $2 billion), they face a dilemma: lacking the flexibility of startups while also not enjoying economies of scale, with 63% of companies burdened by floating-rate debt, clearly under pressure in an environment where inflation is maintained at 3.2%. This "middle-layer dilemma" highlights the structural costs in the technological revolution.

Looking ahead to 2024-2029, S&P 500 companies will face direct impacts from emerging tech companies. Will these disruptors still follow the traditional IPO route? Compared to old-school economists who talk in theory, frontline entrepreneurs 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 still hold?

Jordi Visser: Market historian Russell Napier points out that changes in the structure of capital flows are truly critical compared to short-term economic fluctuations. Tariff policies are driving dollar repatriation, which will continue to suppress the dollar and affect the yield curve.

In the AI-driven new economic landscape, the stock market exhibits two major characteristics: the top 10% of the population contributes half of consumption, combined with massive assets and transfer payments, resulting in strong consumption resilience; at the same time, $300 billion in AI spending is boosting profit margins and driving 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 experience sideways fluctuations rather than a significant downturn, with the greatest risk being failing to keep up with inflation. In this technology-driven era, neglecting the productivity changes brought by AI may result in missing important investment opportunities.

(4) Debt, Interest Rates, and Bitcoin's Hedging Logic​

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

Jordi Visser: In the current economic policy environment, the institutional adoption rate of Bitcoin is accelerating. Sovereign wealth funds and government institutions are continuously increasing their holdings, and people are finally beginning to see it as a necessary component of asset allocation due to its unique value stemming from low correlation with traditional assets.* Bitcoin demonstrates resilience during market downturns and rebounds ahead of the stock market.*

However, the second half of the year may face interest rate risks triggered by debt deficit issues. The yield on 30-year Treasury bonds is nearing a 20-year high, directly related to Asian capital repatriation and the deterioration of the U.S. fiscal situation. When the yield on 10-year Treasury bonds breaks through the 4.8%-4.85% range, the correlation between stocks and bonds may change. Pension funds, having achieved sufficient funding due to rising interest rates, may increase their bond allocations, further pushing up long-term rates.

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

Jordi Visser: The core driving factor of Bitcoin's price movement lies in the changing correlation between the dollar index and U.S. Treasury yields.**** The current market shows structural divergence: although U.S. stocks continue to rebound, the dollar index's fluctuation range is narrowing, while the federal funds rate remains high. This state of divergence is difficult to sustain in the long term.

As interest rates rise further, U.S. consumer credit and mortgage default rates have climbed to cyclical highs. In this context, policymakers may be forced to introduce housing market rescue policies. Although the likelihood of directly implementing quantitative easing is low, similar targeted liquidity support measures as 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 tech industry shows significant differentiation. The leading tech companies, the Mag7 (specifically referring to the seven tech giants like Microsoft, Apple, Nvidia, etc.), are basically immune to financing cost pressures, and companies in the AI field also demonstrate strong profit resilience.* This structural difference provides a foundation for Bitcoin's potential short squeeze.*

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

Jordi Visser: The current economy shows structural differentiation, with corporate bankruptcies coexisting alongside 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 does it hide a systemic crisis? Whether the decline of traditional industries can match the growth pace of emerging sectors will determine the sustainability of this transformation.

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

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

Jordi Visser: From a micro perspective, corporate bankruptcies do indeed cause social costs such as job losses and interruptions in family income; but from the macroeconomic operational mechanism, this process of survival of the fittest is akin to organizational optimization of enterprises, which is a necessary way to maintain market vitality and promote industrial upgrading. This is essentially the essence of economic recession;* creative destruction* is happening.

Career interruptions can also become opportunities for skill upgrades. Last year, after my hedge fund closed, I chose to start a business, turning to AI learning and Python programming, achieving a career transformation. This shows that as long as time is invested, even at 58, continuous learning can break age limits and open new career paths. For job seekers, mastering AI skills will significantly enhance competitiveness.

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

Jordi Visser: We should maintain a cautious attitude towards any phased disclosed investment 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 abroad will face systemic devaluation risks.

Currently, the debt and fiscal deficit issues lack effective solutions, and the dollar's weakness will show gradual 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, and this "nominal tightening" policy is inherently consistent with the strategy of Asian and European investors gradually reducing their holdings of U.S. Treasuries—maturing funds may not be fully reinvested.

What’s more concerning is the global competitive landscape of the AI industry. The technological advantages of U.S. startups are facing global competition, and European developers are fully capable of developing products similar to Cursor and Replit. If the market position of Mag7 companies is shaken, global income redistribution will trigger a restructuring of capital flow patterns, which is far more strategically significant than short-term investment scales.

Disclaimer

The content of this article does not represent the views of ChainCatcher. The opinions, data, and conclusions in the text represent the personal stance of the original author or interviewee. The compiler maintains a neutral stance and does not endorse their accuracy. This does not constitute any professional advice or guidance, and readers should exercise caution based on independent judgment. This compilation is for knowledge-sharing purposes only; readers should strictly comply with the laws and regulations of their respective regions and refrain from participating in any illegal financial activities.