Crypto Falls as Adoption Surges, US Debt Growth Unstoppable

Hi Reader,

Thanks for reading The BlockByte Weekly, where we summarise the key updates in crypto over the last week and provide our perspective on what you need to know as an investor.​
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Weekly Market Snapshot

• BTC: $104,494 (~A$162,563) (-3.0%)
• Crypto Market Cap: $3.22T (-3.5%)
• Gold: $3,288/oz (-0.2%)
• S&P 500: 5,911 (+2.2%)
• ASX 200: 8,434 (+0.9%)
• 30-Year Treasury Yield: 4.9% (-2.3%)

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Executive Summary

Despite a 3.5% decline in the crypto market and Bitcoin dropping to $104,494, significant institutional adoption underpins our bullish long-term outlook. Trump’s Media & Technology Group has completed a $2.3B capital raise to buy Bitcoin, publicly listed GameStop purchased $513M of Bitcoin and Pakistan has announced a Bitcoin treasury strategy. The main factors driving short-term market sentiment continue to be Trump. This week saw his tariffs blocked then reinstated. Additional proposed tax policies on foreign direct investment are adding to market uncertainty, particularly in stocks and bonds. We believe this positions digital assets as tariff-free investment alternatives. Lastly, Lyn Alden’s analysis highlights the U.S.’s 120% debt-to-GDP ratio, with rising public sector debt outpacing private sector debt, rendering traditional rate hikes ineffective at slowing debt growth. We therefore maintain a very bullish outlook on Bitcoin and gold’s future price performance.

Market Update

Huge Week For Bitcoin & Crypto Adoption, Despite Price Fall

After brushing $112,000 just over a week ago, you could look at today's price and be disappointed. Short-term technicals show a sharp reversal in the price of bitcoin and the crypto market more broadly. However, this week there were some significant announcements made which are nothing short of bullish, take a moment to digest the following:

• Trump's Media & Technology Group to completes $2.3B capital raise to buy Bitcoin.
• Publicly listed GameStop buys 4,710 BTC for $513M
• Pakistan to create strategic Bitcoin reserve, plans to allocate 2,000 Mega Watts of electricity to Bitcoin mining and AI data centres (roughly 10% on top of the estimated 20,000 MW of power currently powering the Bitcoin mining network
• Vice President JD Vance delivers speech on the importance of freedom and being politically active at the latest Bitcoin Conference, currently being held in Las Vegas
• Former Presidential candidate Vivek Ramaswamy believes that Bitcoin is the new hurdle rate or cost of capital that any investment should be assessed against before making a decision

There's countless more stories just like the above which we've been covering over the last several months which show a significant increase in the adoption of Bitcoin as a reserve asset by insitutions (TwentyOne, Basel Medical Group, Tether, MetaPlanet etc.) and even local state governments (Texas looks set to become the 3rd US state to adopt a Bitcoin reserve later this month).

There were also some positive announcements outside of Bitcoin, including gaming company SharpLink adopting an Ethereum treasury strategy, purchasing $425M worth of Ether, with plans to buy a further $1B with a share offering to the public. Other companies including De-Fi Dev Corp have similar plans but using Solana as their reserve asset. Whilst these altcoin reserves are not as common, getting in earlier to the company's undertaking these strategies has delivered outsized returns.

Court of International Trade Blocks Trump's Tariffs, Now Temporarily Reinstated

Earlier this week, the U.S. Court of International Trade ruled that President Donald Trump’s sweeping 10% tariffs on most U.S. trading partners were illegal, issuing an injunction with a 10-day compliance period. However, the U.S. Court of Appeals granted a temporary stay, reinstating the tariffs pending the Trump administration’s appeal.

Additionally, Trump’s proposed tax bill, specifically Section 899, introduces a “revenge” tax targeting foreign investors from countries deemed to have “discriminatory” tax policies, such as digital service taxes on U.S. tech firms. This provision could raise taxes on passive income (e.g., dividends, interest) by up to 20%, potentially deterring foreign investment. The to-and-fro of Trump’s tariff and tax policies remains a major destabilising factor for global markets, forcing trade partners and investors to decide whether to pursue deals with the U.S. or await legal resolutions.

Whilst these news events create chaos in markets, we see more downside risk to US stocks and bond markets. Bitcoin, gold and the digital asset industry continue to look positioned as a neutral, tariff free investment alternative for global investors. We think under either scenario of a trade war or deals being struck, it's likely that we see Bitcoin continue to climb higher over the coming years, albeit a 25%-30% pullback is typical, so be ready for those dips.

'Nothing Stops This Train' - What That Means, Why it Matters, Why it's so Unstoppable

At BlockByte, we read through countless articles, news, data on blockchains and technical analysis. However, if we had to pick our favourite video so far this year, it's this brilliant talk by engineer and macro-analyst Lyn Alden.

In her talk, Lyn outlines why this time is different to the preceding sixty years we've experienced in the global economy. Whilst I'd recommend watching the video to get the full detail, some of the key points Lyn highlights are as follows:

• Debt levels in the US exceed 120% of GDP, and the growth rate of public sector debt is consistently exceeding private sector debt growth.
• What this means is that historically, when inflation was rising, governments could step in to increase interest rates which increases the cost of borrowing. In turn, this reduces the growth of private sector debt and thus economic growth as businesses have less capital to borrow and invest in growth.
• However, increasing rates with a high national debt (~$36T), is now increasing the growth in public sector debt faster than what it reduces private sector debt growth.
• This means that the Federal Reserve is effectively damned if they raise rates, and dammed if they drop them. This is why Lyn is saying that 'nothing stops this train', referring to the now unstoppable mounting debt levels the US faces.

There's a few technical graphs in there, but we think this video is worth watching twice, perhaps a few days apart to fully digest what she's saying.
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Until next week,
James

James Brannan
Managing Director
BlockByte
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(+61) 412 393 634
​james@blockbyte.com.au​
​https://blockbyte.com.au/​

BlockByte does not provide financial advice. We provide a personalised brokerage service with tailored support, research and secure custody for investing in digital assets. Reach out to our team to discuss how we can help.

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