Soundings

Given the headlines, you’d be forgiven for expecting this to be another post about Artificial Intelligence (AI). This one’s about the other existential crisis: dollar hegemony.

National debt just crossed $40 trillion, and the cost of servicing it has hit levels not seen since the 1990s, when 30-year Treasuries yielded 8% versus roughly 5% today. We’ve written previously about the debasement trade (The “Basement” Trade and Gold Math) whereby investors bid up alternatives to the U.S. dollar, namely gold and its digital equivalent, Bitcoin, as they seek a safe haven.

Our analysis of Bitcoin and other digital assets is ongoing. We actively employ assets in classes that have stood the test of time and markets – public and private equities, fixed income and cash, real estate – as appropriate, across portfolios. We strive for intellectual integrity by regularly revisiting our understanding of emerging assets and strategies that have not been tested in the same way.

Bitcoin’s fixed supply of 21 million coins guarantees scarcity, and like gold, price is a function of demand. It has outpaced inflation since launching in 2009 amid the Global Financial Crisis, though not without real volatility.

Volatility has declined markedly in recent years with institutional adoption. The first Bitcoin ETFs were launched in early 2024 into substantial demand. BlackRock’s iShares Bitcoin Trust currently manages tens of billions of dollars offering investors a means of owning Bitcoin indirectly in traditional investment accounts – expanding ownership beyond digital wallets. Governments are increasingly holders of Bitcoin. According to a recent VanEck webinar, two dozen countries including the U.S. maintain strategic crypto reserves. While the U.S. acquired its Bitcoin largely through seizures, other countries actively mine Bitcoin turning excess electricity into reserves. Corporations have also introduced strategic crypto reserves as a means of diversifying their balance sheets. It stands to reason that more long-term HODLers translates to lower levels of volatility.

Bitcoin is still far more volatile than the dollar it’s meant to hedge. The dollar’s near 10% decline in 2025, was its worst year since 2017. In contrast, Bitcoin halved between its October 2025 peak and mid-2026. (Gold also experiences higher levels of volatility as demonstrated by its 20% decline from its January 2026 peak.)

Bitcoin behaves differently from gold: negatively correlated with the dollar, like gold, but positively correlated with the S&P 500. While the decentralized, policy-independent nature of Bitcoin has led to its inclusion in the debasement trade, its performance in risk-on and risk-off environments leaves it unproven as a safe haven asset.

And despite the blockchain’s speed and transparency, Bitcoin still isn’t a real medium of exchange. Sixteen years after the now famous 10,000 Bitcoin ($865 million today) purchase of two pizzas, it’s still unheard-of to buy a pizza with Bitcoin. That said, its ability to cross borders frictionlessly beats gold’s logistics: witness the Dutch central bank’s monthslong effort this year to relocate 86 tons of gold from New York and Ottawa to the more tradable vaults of the Bank of England.

Bitcoin’s real weakness is infrastructure. It needs the grid and connectivity to function; gold just needs to exist. In a genuine crisis, that’s no small difference. There’s a longer-horizon risk as well: Bitcoin’s cryptography predates serious quantum computing. Not a threat today, but the risk is difficult to dismiss outright should investment horizons extend 15 to 20 years.

We appreciate that the anxiety around an unprecedented U.S. debt load, a Treasury increasingly leaning on short-duration issuance to manage financing costs, and a geopolitical order that no longer assumes American primacy, screams for a hedge against debasement and de-dollarization. Barring real transactional utility, steadily declining rather than episodic volatility, a more mature regulatory framework, and credible plans for resilience during a genuine grid failure, Bitcoin feels less like a reserve asset and more like an opportunistic position suited to investors with long investment horizons and strong stomachs.

Tide Cycle Resources (Tide Cycle) is an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. A copy of Tide Cycle’s Forms ADV Part 2 and Form CRS are available without charge upon request. The opinions expressed are those of Tide Cycle. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future. This should not be taken as specific investment advice. We recommend consulting an investment/tax professional before making financial decisions based on any information provided.

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