Written in Singapore on April 14, 2025
Kondratieff node, qualitative change of bits.
Trumps tariff policy has caused turmoil and strong anxiety in the global market. The VIX index reached 52 on April 8, but it is obvious that this is far from enough to release the overly complex superposition contradictions at this stage. Fiscal and monetary policies can only provide short-term emotional value at present. In the environment of triple kill of bonds, stocks and currencies, when everyone is panicking, the asset allocation problem has also fallen into a desperate situation. What should I hold now? It seems to have become a question that everyone is concerned about in 25 Q2.
When will Bitcoin rebound and rise again? This was probably the most asked question at the Web3 Festival in Hong Kong in the first two weeks of April. In many panels and meetings, everyone asked and thought about how Trumps tariff policy would affect the Crypto market and the price of Bitcoin. To be honest, this simple question is not easy to explain, so I came back and wrote this article for your reference.
tl;dr
1. The triple kill problem of bonds, stocks and foreign exchange and the failure of the Merrill Lynch clock
2. Comparison between the Thucydides Trap and the end of the five historical Kondratieff cycles
3. The significance of Crypto at the intersection of Greenspan’s prediction and Kondratieff cycle
4. What is the real Thucydides Trap this time?
5. Bitcoin’s correlation with chaos changes: a shift in inertial cognition and similarities to the Merrill Lynch clock problem
6. The fundamental reason for the continued growth of the second curve of Crypto growth
1. The triple kill problem of bonds, stocks and foreign exchange and the failure of the Merrill Lynch clock
Why did Trump adopt an extreme tariff policy? Simply put, this looks very MAGA, which can reduce import dependence, boost employment and mobilize political sentiment. Unfortunately, the American people are not just little pinks. High inflation and a fiscal deficit of 1.3 trillion are not a good soil for everyone to buy-in Made in the USA. The real survival problem is imminent and irreconcilable. Under the condition that fiscal policy and monetary policy are no longer useful, it can be said that tariff policy is the last resort. Buffett also pointed out in a recent interview: They (Tariffs)re an act of war to some degree. Although many of Buffetts ideas are outdated in the paradigm of the next era, this empirical judgment is still very accurate. The world is at the node where a new Kondratieff cycle intersects. The post-war peace and credit system have collapsed, and the reshaping of the new mechanism in the chaotic era has begun.
In addition to the high VIX index, the decline of bonds, stocks and currencies at this stage is a relatively obvious signal. At this conference of the Hong Kong Web3 Festival, I was very happy to discuss in depth with Dr. Yi the historical similarities of the triple kill of bonds, stocks and currencies in 1929 and 1971. The various economic indicators and external environment at these two time points are very similar to the current 2025. In the end, whether it will follow the script of the Great Depression + local war, the script of the Cold War confrontation, or a completely new independent script depends on (causally speaking, it should be reflected in) the performance of safe-haven financial assets, especially gold. The so-called hoarding of gold in troubled times is the characteristic of this Kondratieff cycle at the intersection of time points. It should be noted that the attributes of gold at this time are completely different from the commodity attributes of the overheated period of the Merrill Lynch clock.
According to the standard view of the Merrill Lynch clock, the transition from stagflation to recession is a process from cash being king to bonds being king, and everyone is waiting for the subsequent recovery period, that is, a new round of growth in which stocks are king. Obviously, we are not in such a state at present. The external environment does not have the conditions to enter the recovery period, and the Merrill Lynch clock cannot continue to move downward. At this time, gold has repeatedly broken historical highs, which has obviously jumped out of the logic of the Merrill Lynch clock. We can also compare this with other commodities: crude oil, silver, copper, soybeans, rubber, cotton, rebar, etc. have maintained the same or slightly higher levels than before the epidemic, which has widened the gap with the increase in gold.
The failure of the Merrill Lynch clock shows that economic policies and market experience at this stage will deviate from conventional expectations. From a macro perspective, Trumps introduction of tariff policies at this time is just a passive driver of historical laws.
Three points are worth adding: ① The Merrill Lynch clock fails only when it does not meet the conditions for its existence in the environment of the cross-Kondratieff cycle node, but the Merrill Lynch clocks own objective laws still hold true under the right external environment; ② During the cross-Kondratieff cycle, in addition to gold, there are still other types of safe-haven financial assets. For example, it is no coincidence that a lot of money in the world has been looking for quantitative funds and CTA strategies recently. Of course, whether Bitcoin will take this opportunity to prove itself as digital gold and break through the positive correlation with other types of financial assets to develop independently, we will have to wait and see; ③ At the cross-Kondratieff cycle nodes in different historical stages, the step at which the Merrill Lynch clock rotates to fail is not so similar, and it is not important in terms of rules. Of course, if from the perspective of specific asset allocation, some asset management companies and FOs are still using the previous inertial strategies, then they must be taken seriously and adjusted in time.
2. Comparison between the Thucydides Trap and the end of the five historical Kondratieff cycles
In 2020, I summarized a chart to describe the industry changes and geopolitical environment comparisons under the five Kondratieff cycles in history. However, after all, few people have experienced the intersection of two Kondratieff cycles. So until today, when I personally felt the impact from the economic and policy aspects, it became more intuitive.
According to past history, the intersection of Kondratieff cycles usually leads to the intensification of the conflict between the Thucydides Trap or the imaginary enemy of the Thucydides Trap, and this time is no exception. However, this time it falls on China and the United States, two countries with relatively large differences in historical civilization paths. It is natural that Trumps tariff policy fermented into this result at this point in time.
The following table gives a comparison of the end points of the five historical Kondratieff cycles:
(Note: The two sides of the Thucydides Trap are expressed in the order of Ruling Power – Rising Power)
As long as we extend our perspective, the failure of the Merrill Lynch clock and economic policies becomes very natural, because the energy confrontation at the junction of the Kondratieff cycles is obviously much greater than the changes in the economic cycle under the Merrill Lynch clock. Therefore, this intersection node will directly shatter the existing Merrill Lynch clock and enter the chaotic era stage.
By direct comparison, our situation and the next decade we face will be very clear. We will not discuss the similarities between the paradigms anymore. Now we need to think about several paradigm-jumping questions: ① Will the new technological paradigm of digitalization and AI bring about innovations in global production relations and governance methods? ② Are China, the United States and China the real Thucydides Trap parties? ③ What role do Bitcoin and Crypto play in the above two questions?
3. The significance of Crypto at the intersection of Greenspan’s prediction and Kondratieff cycle
Similar to the tariff policies at the intersection of the Kondratieff wave in history, Trump’s tariff policy this time will also trigger a butterfly effect to a certain extent. Whether it is the economic problems within the United States or the handling of Sino-US relations, if it is not smooth and reasonable, it will definitely trigger the conduction effect of the outbreak of the chaotic era.
However, the possibility of failure this time is not just the Merrill Lynch clock at the intersection of the Kondratieff cycle mentioned above. From a longer-term perspective, as the new paradigm of digitalization and AI gradually changes the essential structure of production unit composition and labor organization in the two hundred years since the Industrial Revolution, the FED will also face the drastic challenge of failure or at least transformation and transformation in this historical stage of governing the US economy through monetary and fiscal policies based on traditional experience, and even influencing the management of the global stable economic and trade pattern.
In his 2013 reflective book, The Map and the Territory: Risk, Human Nature, and the Future of Forecasting, Greenspan wrote:
“We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints.”
(“Monetary and fiscal policy cannot permanently boost economic growth in the presence of deep structural constraints.”)
I guess most people have recognized or at least felt at this stage that the world is now facing very deep structural constraints. The global pattern and economic policy methods that have evolved since the industrial revolution are increasingly unable to match the needs of the rapid development of digitalization and AI. Since the rapid outbreak of the digitalization and AI era, production tools have changed exponentially. Coupled with the 16-year four-cycle development of the Crypto Market and Degen triggered by the emergence of Bitcoin in 2009, the energy accumulated by productivity and production relations will obviously explode with qualitative changes at the intersection of this fragile Kondratieff cycle.
It is difficult to say so arbitrarily that Crypto and Blockchain Protocol Management will soon take over all the economic policy governance work corresponding to the previous paradigm from this point on, but it is obviously an unavoidable trend. It is very likely that in the next few decades, the world will continue to be in a dualistic parallel governance structure, that is, Crypto and Blockchain Protocol Management will continue to grow or dominate the global economy, finance, transactions, settlements, and even some social governance work. At the same time, the society and economy managed by national sovereignty, including monetary and fiscal policies, are still managed in parallel in some regions according to the original cultural methods and interest needs. This also responds to the solution direction of the current major contradictions in the global world mentioned in the article The dramatic changes in the pattern after Trumps victory.
In summary, Crypto is of great significance at this intersection and turning point, and will comprehensively change the global economic and social landscape.
4. What is the real Thucydides Trap this time?
I don’t think the Thucydides Trap at this stage is between China and the United States. It doesn’t mean that the economic size between China and the United States does not constitute competition, nor does it mean that the greater power confrontation in the future will unfold between the West and Islam as Huntington said in The Clash of Civilizations. This paradigm shift is obviously a change that goes beyond nationality and race.
I remember that as early as 2014, a famous Korean investor friend who invested in Kakao told me that he believed that the worlds major cities are not much different, and the civilization consensus among them has exceeded the consensus between cities in many countries. The consensus formed by Digital Nomads and Degen in recent years has further proved this point.
When looking at historical laws such as the Thucydides Trap, on the one hand, we need to compare the similarities of historical paradigms, and on the other hand, we need to look at the correspondence of paradigms from the perspective of technological and production changes. Especially at this intersection of breaking the deep structural constraints, in fact, the differences in the management positions of China and the United States are not greater than the essential differences between TradFi and DeFi, nor the differences between the maritime law system and Crypto Protocol, and even less than the ideological and cultural differences between conservatives and Degen.
As I mentioned in a previous article: Most countries and stakeholders in the world are still in a semi-feudal and semi-centralized state capitalist environment. The current main contradiction is making them transition to a semi-centralized state capitalist and semi-decentralized digital information managerialism environment. The current global Kondratieff cycle intersection point, as well as the transformation momentum of accumulated contradictions, will bring about a paradigm shift trend that must point to the latter.
Looking back at the changes after the past five intersections, chaos and reconstruction, the surge in safe-haven assets, and the rapid development of a new generation of production technology in the transformation are all inevitable trends. The difference is that although the energy accumulation this time is more powerful and globalized, the direction of change this time is decentralized and system abstract. Therefore, in response to the question in the first paragraph, I think this time (the energy explosion at the node) is more likely to face a brand new independent script. The degree of global chaos will be high, but the confrontation will not be particularly focused.
5. Bitcoin’s correlation with chaos changes: a shift in inertial cognition and similarities to the Merrill Lynch clock problem
In such a background, Bitcoin has obviously made all preparations to receive the title of digital gold. However, the development of history is tortuous. As of Q2 25, in the environment of increasing chaos and panic, Bitcoins hedging ability is still slightly inferior to gold. When the chaos increases, it still has a similar decline as bonds, stocks and foreign exchange, that is, the price is negatively correlated with the chaos in a certain proportion.
I will not elaborate on how to define chaos here. VIX can be an important factor indicator. In addition, MOVE index, hidden volatility of various assets, Libor-OIS spread, gold price volatility, the divergence between FED and central bank interest rates, the proportion of countries with negative interest rates, war risk index and the degree of global trade disruption can all be used as references.
The problem of a certain negative correlation with the degree of chaos is of course mainly determined by the mentality of the holders. This means that at least half or more of the Bitcoin holders are still holding Bitcoin for asset appreciation or simply for speculation (why it is close to half? Because a large proportion of Bitcoin holders are locked for a long time or have lost their private keys, and there are also cases where they are unwilling to sell. These two types of irrationality provide a positive correlation), and the turnover rate of these people is still very high.
However, from the data of the past six months, the performance of Bitcoin and all other altcoins has shown a big difference. Although Bitcoin and various altcoins are not negatively correlated, Bitcoins ability to resist declines in various environments has gradually become prominent. One important point is that in the face of the current environment with increasing chaos after the end of 2024. This also shows that the correlation between Bitcoin and chaos is quietly changing, the negative correlation is weakening, and the positive correlation is increasing.
Since taking office in his second term, Trump has signed more than 100 executive orders and has continuously implemented loose policies for the Crypto industry. Coupled with the recent ignition of the tariff policy, these actions are promoting the occurrence of the intersection of the Kondratieff cycle from a macro perspective, thus entering a fierce confrontation between the old and new cycles. Of course, this will also help to achieve an accelerated reversal of the correlation between Bitcoin and chaos. As of mid-April 2025, the SEC has officially withdrawn lawsuits against a number of Crypto projects, including Uniswap, Gemini, OpenSea, Kraken, Consensys, Cumberland, Coinbase and Ripple; in addition, the FDIC and OCC have also made major adjustments to the supervision of banks participation in Crypto business, canceling the requirements for banks to develop Crypto business to obtain approval and declaration. However, the benefits of these contents have not been fully digested by the public in the panic of the current chaotic environment. There are still many factors in the 2.6 trillion market that have not been priced in (this does not include the rapidly developing RWA and PayFi markets mentioned later).
Standing at the end of the garbage time in history, we now have to think about two questions: ①Before it forms a positive correlation with chaos, will there be another round of emotional decline? ②How long will it take for Bitcoin to form a strong positive correlation with chaos like gold and become a safe-haven asset? The accelerator to ignite this trend usually requires a change in the market and the publics inertial cognition, and this transformation process usually takes a long time to achieve smoothly, which is obviously not allowed at the current historical intersection. Of course, Bitcoin has always been alerting and educating the market and participants in an anti-cognitive way, so in the future, there is a high probability that there will be extreme or counter-common sense market conditions.
Similar to the Merrill Lynch clock, Bitcoin has also formed a four-year bull-bear conversion cycle in the Crypto market due to its own halving, and from the perspective of emotional transformation and asset class selection preferences, the process is very similar, but it is only 2.5 times faster. However, after 16 years of four cycles of development, this year has also shown irregular characteristics, so that many people believe that the current situation is already a bull in name but a bear in reality, and attribute the failure of the strategy to the entry of ETFs and the collapse of Meme confidence. In fact, in essence, I think this is all related to the energy intervention at the intersection of the Kondratieff cycle, that is, the current global chaos has also destroyed the original rules of the Crypto market at this time. The past four cycles have made people familiar with the operating rules of Bitcoin and the Crypto Market, and have successfully won the strategic reserves and professional institutional configurations of countries around the world. At this time, cleverly breaking the rules through the intersection of the Kondratieff cycle may be the best time for Bitcoin to stand out and become a qualitative change in digital gold.
In summary, 2025 is an intersection of a historical Kondratieff cycle with drastic changes. We may experience a short-term decline that breaks the original four-year cycle experience, but we will soon see a qualitative change in Bitcoin that is positively correlated with the degree of chaos, and this will drive the development of the entire Crypto market in the next stage, which is the second curve of Crypto growth.
6. The fundamental reason for the continued growth of the second curve of Crypto growth
At the Hong Kong Web3 Festival in early April 2025, the RWA Topic was already extremely popular, surpassing the competition and successfully breaking the prejudice of some Native Degens in the previous cycle.
Seeking real yield and sustainable development has gradually become a new consensus in the Crypto Market this year. History is forced, because after experiencing the frenzy of Meme and BTCFi narrative baptism in 2024, if real yields and real applications are not connected, it is basically difficult for people to believe the first curve logic of storytelling alone.
In my previous article The Second Curve of Crypto Growth, I mentioned and discussed some phenomena and initial reasons for the rise of RWA and PayFi. Through this articles description of the intersection of the Kondratieff cycle, we can understand that the more fundamental reason for this trend is actually the irreversible need to build a new cycle and a new paradigm under chaotic changes.
Many people at this stage are worried about whether RWA and PayFi will be short-lived like other narratives and never come back. It is clear that unlike narrative renovation and empty pledge, long-term institutional things will have lasting value.
As of Q1 25, a large number of actual PayFi application scenarios and RWAFi funds have begun to emerge rapidly. The rapid development of a new generation of projects, protocols and public chains such as CICADA.Finance and Plume will bring overall changes to the market in 2025, and will also lay a sufficient foundation for the continued growth of Cryptos second curve.
Trump’s tariff policy is actually just a butterfly effect, but there will be historic opportunities at the intersection of the Kondratieff cycle. The expectation and implementation of the qualitative change in the reversal of the correlation between Bitcoin and chaos will become an important factor in driving the growth of various Crypto second curve industries including RWA and PayFi, representing the beginning of the gradual penetration of Crypto and Blockchain Protocol Management into the global economy, finance, transactions, settlements and various social governance work in the first stage after entering the new Kondratieff cycle.
