On the eve of a major US dollar devaluation, bitcoin is waiting for the final catalyst

Original Title: BTC: Onchain Data Update + our views on last week's FOMC and the "big picture"

Original Author: Michael Nadeau, The DeFi Report

Original Translation: Bitpush News

Last week, the Federal Reserve lowered interest rates to a target range of 3.50%–3.75%—a move that was fully priced in by the market and largely expected.

The real surprise for the market was the Fed’s announcement that it would purchase $40 billion in short-term Treasury bills (T-bills) each month, a move that was quickly labeled by some as "QE-lite".

In today’s report, we will delve into what this policy change has and hasn’t altered. Additionally, we’ll explain why this distinction is crucial for risk assets.

Let’s get started.

1. "Short-term" Positioning

The Fed cut rates as expected. This was the third rate cut this year and the sixth since September 2024. In total, rates have been reduced by 175 basis points, pushing the federal funds rate to its lowest level in about three years.

In addition to the rate cut, Powell also announced that starting in December, the Fed would begin "Reserve Management Purchases" of short-term T-bills at a pace of $40 billion per month. Given the ongoing tightness in the repo market and banking sector liquidity, this move was entirely within our expectations.

The current market consensus (whether on X or CNBC) is that this represents a "dovish" policy shift.

Debate over whether the Fed’s announcement equates to "money printing," "QE," or "QE-lite" immediately flooded social media timelines.

Our observations:

As "market observers," we find that market sentiment still leans toward "risk-on." In this state, we expect investors to "overfit" policy headlines, trying to piece together bullish logic while ignoring the specific mechanisms by which policy translates into actual financial conditions.

Our view is: The Fed’s new policy is positive for the "financial market plumbing," but not positive for risk assets.

Where do we differ from the prevailing market consensus?

Our views are as follows:

· Purchasing short-term T-bills ≠ absorbing market duration

The Fed is buying short-term T-bills, not long-term coupon bonds. This does not remove interest rate sensitivity (duration) from the market.

· Does not suppress long-term yields

Although short-term purchases may slightly reduce future long-term bond issuance, this does not help compress the term premium. Currently, about 84% of Treasury issuance is already in short-term notes, so this policy does not materially change the duration structure faced by investors.

· Financial conditions are not broadly eased

These reserve management purchases, aimed at stabilizing the repo market and bank liquidity, will not systematically lower real rates, corporate borrowing costs, mortgage rates, or equity discount rates. Their impact is local and functional, not broad-based monetary easing.

Therefore, no, this is not QE. This is not financial repression. To be clear, the acronym doesn’t matter; you can call it money printing if you like, but it is not deliberately suppressing long-term yields by removing duration—which is precisely what would force investors up the risk curve.

This is not happening at present. Since last Wednesday, the price action of BTC and the Nasdaq Index has confirmed this.

What would change our view?

We believe BTC (and risk assets more broadly) will have their moment to shine. But that will happen after QE (or whatever the Fed calls the next phase of financial repression).

That moment will arrive when the following occur:

· The Fed artificially suppresses the long end of the yield curve (or signals this to the market).

· Real rates fall (due to rising inflation expectations).

· Corporate borrowing costs decline (fueling tech stocks/Nasdaq).

· Term premium compresses (long-term rates fall).

· Equity discount rates fall (forcing investors into longer-duration risk assets).

· Mortgage rates fall (driven by suppressed long-term rates).

At that point, investors will sense the "financial repression" and adjust their portfolios. We are not in that environment yet, but we believe it is coming. While timing is always difficult, our base case is that volatility will increase significantly in the first quarter of next year.

This is how we see the short-term landscape.

2. The Bigger Picture

The deeper issue is not the Fed’s short-term policy, but the global trade war (currency war) and the tensions it creates at the core of the dollar system.

Why?

The US is moving into the next stage of its strategy: reshoring manufacturing, rebalancing global trade, and competing in strategically essential industries like AI. This goal is in direct conflict with the dollar’s role as the world’s reserve currency.

Reserve currency status can only be maintained if the US continues to run trade deficits. In the current system, dollars are sent overseas to buy goods, then cycle back into US capital markets via Treasuries and risk assets. This is the essence of the "Triffin’s Dilemma."

· Since January 1, 2000: Over $14 trillion has flowed into US capital markets (not counting the $9 trillion in bonds currently held by foreigners).

· Meanwhile, about $16 trillion has flowed overseas to pay for goods.

Efforts to reduce the trade deficit will inevitably reduce the recycling of capital back into US markets. While Trump touts that countries like Japan have promised to "invest $550 billion in US industry," what he doesn’t mention is that Japanese (and other) capital cannot simultaneously exist in both manufacturing and capital markets.

We do not believe this tension will be resolved smoothly. Instead, we expect higher volatility, asset repricing, and ultimately a monetary adjustment (i.e., dollar devaluation and a shrinkage in the real value of US Treasuries).

The core point is: China is artificially suppressing the renminbi exchange rate (giving its exports an artificial price advantage), while the dollar is artificially overvalued due to foreign capital investment (making imported goods relatively cheap).

We believe that a forced dollar devaluation may be imminent to resolve this structural imbalance. In our view, this is the only viable path to address global trade imbalances.

In the new round of financial repression, the market will ultimately decide which assets or markets qualify as "stores of value."

The key question is whether, when the dust settles, US Treasuries can continue to serve as the world’s reserve asset.

We believe that bitcoin and other global, non-sovereign stores of value (such as gold) will play a much more important role than they do now. The reason: they are scarce and do not rely on any policy credibility.

This is the "macro landscape" as we see it.