False Narratives....and other thoughts
I wanted to give you some insights I got from writing GMI this weekend that will help give you some confidence. Settle in, grab a glass of wine or a coffee... I'd normally save this for GMI and Pro Macro but I know you all need your nerves calmed....
The Big Narrative
The big narrative is that BTC and crypto are broken. The cycle is over. It's all fucked and we cant have nice things. It has dislocated from other assets, its CZ's fault, its Blackrock, its whatever. It is an alluring narrative trap for sure... especially when we see prices puking each and every fucking day...
But yesterday a GMI hedge fund client sent me a quick note about whether he should buy SaaS stocks as they are discounted or has Claude Code killed SaaS as the current narrative suggests.
I decided to dig in...
What I found destroyed both the BTC narrative and the SaaS narrative. SaaS and BTC are the EXACT same chart. Huh?
That means there is another factor at play that we have all missed...
That factor is that US liquidity has been held back due to the 2 shutdowns and issues with US plumbing (the drain of the Reverse Repo was essentially completed in 2024). The TGA rebuild in July and August therefore had no monetary offset. The result was a drain in liquidity...
That so far lackluster liquidity is the reason why the ISM has been so low...
We usually use Global Total Liquidity as it has the highest correlation to BTC and NDX over the long-term but it appears that US Total Liquidity is more dominant at this phase, as the US is the key provider of global liquidity.
This cycle GTLI has led USTLI and a pick up is coming (and thus ISM)
And this is what is affecting Saas and BTC...
Those are both the longest duration assets that exist and both got discounted because liquidity was temporarily withdrawing.
The rally in gold essentially sucked all marginal liquidity out of the system that would have flowed into BTC and SaaS. There was not enough liquidity to support all these assets, so the riskiest got hit. C'est la vie.
Now, the US gov is shutdown...again. The Treasury hedged this by not drawing down the TGA at all after the last shutdown and in fact added more to it (more liquidity drain).
This is the current air pocket we are facing and it's causing brutal price action. No liquidity for our beloved crypto yet.
However, the signs are that this shutdown will get resolved this week and that is the FINAL liquidity hurdle out of the way.
I have mentioned the risk of this shutdown a few times. Soon it will be in the rear view mirror and we can get on with the liquidity flood that is to come from the eSLR, the partial drain of the TGA, the fiscal stimulus, rate cuts etc. it is all about the mid-terms...
Often in these full cycle trades, it is time that is more important than price. Yes, prices can get killed but as time extends and the cycle plays out it all resolves, and ailligator jaws close.
This is why I preach "PATIENCE!". Things need to play out and tick watching your P&L just affects your mental health, not your portfolio.
The Fed False Narrative
On the subject of rate cuts, there is another false narrative going around that Kevin Warsh is a hawk. It is utter fucking nonsense. These were comments mainly from 18 years ago.
Warsh's job and his mandate is the run the Greenspan era playbook. Trump has said this, as has Bessent. It's too long to go into here but it means cut rates and let the economy run hot and assume the the AI productivity rise will subdue Core CPI. Just like the 1995 to 2000 era.
He is no fan of the balance sheet but the system hit reserve constraints so likelihood is he wont change its current course. He cant or he blows up the lending markets.
Warsh will cut rates and do nothing else. He will get out of the way of Trump and Bessent who will run liquidity via the banks. Mirran will likely force through the full reduction in the eSLR too in order to goose the process.
Dont believe me... then believe Druck.
I know how hard it is to hear bullish narratives when things feel so bleak. Our Sui positions feel like utter dog shit and we don't know what or who to believe anymore.
Firstly, we have lived this many times before. When BTC falls 30%, smaller tokens fall 70%. They recover faster too, if they are high quality.
(If you want to read more Sui analysis - there is a lot more on my free note on the Real Vision platform). You can sign up for free and it should be in the feed or under the notes section.
www.realvision.com/join
Mea Culpa
Our mistake at GMI was not seeing the US liquidity as the current driving factor, when it is usually Global Total Liquidity that dominates over the full cycle. But now it is clear, and it is still The Everything Code at play...
There is no disconnect. It's just that the confluence of events Reverse Repo drained >TGA rebuild > Shutdown > Gold rally > Shutdown was not forecastable by us, or in any event we missed the impact.
It is almost over. FINALLY. Soon we can return to normal business.
We just can't get every moving part right but we now have a better understanding and we remain HUGE bulls for 2026 because we know the Trump/Bessent/Warsh playbook.
They told us...repeatedly. All we have to is listen and be patient.
Its time not price in full-scale investing.
If you are not a full cycle investor and don't have the risk tolerance that is absolutely fine. We all have our styles but Julien and I are not swing traders and we suck at it (we dont really care about the ups and downs within the cycle), but our proven and recoded track record in full-cycle investing is amongst the very best ever move the last 21 years. (Caveat - we also can get it wrong. 2009 was a stunningly awful example!)
Now is not the time to give up... good luck and let's have a fucking epic 2026!
The liquidity cavalry are coming.
