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Bitcoin, AI, and the unstoppable deficit train

by Catatonic Times
August 11, 2025
in Crypto Exchanges
Reading Time: 13 mins read
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Welcome to Slate Sundays, CryptoSlate’s new weekly characteristic showcasing in-depth interviews, skilled evaluation, and thought-provoking op-eds that transcend the headlines to discover the concepts and voices shaping the way forward for crypto.

Lyn Alden is an distinctive human.

Broadly acknowledged as one of many high minds in macroeconomics, throughout a dialog with Lyn, you’ll be able to really feel a few of her huge mind rubbing off on you; I swear my IQ elevated a number of factors by the point our chat was over.

Even navigating heavy matters just like the fiscal deficit and the onset of AI, she does so with a smile on her face and extra eloquence and poise than an Olympic gymnast executing a triple backflip.

Founding father of Lyn Alden Funding Technique and normal accomplice at enterprise agency Ego Loss of life Capital, alongside different business heavyweights like Jeff Sales space and Preston Pysh, Lyn has earned her stripes over time as one of the crucial revered macro analysts within the house.

She’s additionally one of the crucial solicited for interviews, due to her razor-sharp insights and depth of market information.

As a prolific content material creator, Lyn presents a free investing e-newsletter and frequents the digital corridors of Crypto Twitter every day, amassing three-quarters of one million followers who depend on her well timed commentary and finely-edged wit: past the plain phrases of knowledge and funding recommendation, Lyn’s one thing of a grasp in terms of memes.

Nothing stops this practice

Lyn is probably greatest recognized for her e-book Damaged Cash, which offers a complete view of the historical past of cash and a well-illustrated critique of the worldwide financial system. She’s additionally extremely vocal about her thesis on the U.S. fiscal deficit, AKA, ‘Nothing stops this practice’.

Sky-high ranges of U.S. spending are rising at a tempo that far outstrips the federal government’s means to pay for it, creating what Lyn dubs a “slow-motion runaway practice.” She explains:

“Giant U.S. fiscal deficits are going to proceed for the foreseeable future, 5, 10 years, any type of investable time horizon. There are a bunch of the explanation why, and quite a lot of them should do with political polarization. It’s very exhausting to both massively increase taxes or massively minimize spending in a really polarized scenario, in addition to mechanically the type of debt ranges they discover themselves in.”

The full sum of money the U.S. authorities owes to its lenders at the moment quantities to an eye-watering $36.9 trillion, representing over 120% of GDP, and rising by round $1 trillion each quarter.

Whole U.S. debt

Even probably the most extremely expert ringmaster with smoke and mirrors would battle to obfuscate such an alarming stage of federal debt. With a diminishing means to pay it off, I’m wondering, if nothing stops this practice, can something sluggish it down? She replies:

“There are many issues that may sluggish it down slightly bit. Tariffs are one of many issues that may sluggish it down as a result of they bypass a few of that polarization. Tariffs are principally actually massive tax hikes that go round Congress due to an emergency authorization government order, so that they briefly bypass a few of the frictions in opposition to them.”

Whereas tariffs might serve to fill the federal government coffers slightly increased, Lyn says the numbers don’t add up sufficient to make a big impression: the deficit is round $2 trillion, and the earnings from tariffs on the present stage solely equates to roughly 1 / 4 of it at round $500 billion a 12 months. Plus, “we’re already seeing exemptions.” She provides:

“The final line for the ‘Nothing stops this practice’ view is that the U.S. may be very financialized, that means that our authorities’s tax receipts are very correlated with asset costs. Any makes an attempt at austerity at this level are likely to fail to handle the issue since you both decelerate the inventory market or decelerate the financial system. Due to this fact, with a lag, you weaken your different tax receipts and make deficit discount on a sustained foundation exhausting.”

I nod, considering the enormity of the scenario and the inevitable collision course the financial system is on. She continues:

“Simply structurally, it’s rising above goal virtually with none strategy to cease it.”

The outlook for Bitcoin and broader crypto markets

We flip the dialog to final week’s market hunch following a weaker-than-expected jobs report that triggered former BitMEX CEO Arthur Hayes to dump a bit of his crypto holdings. I ask Lyn how vital the roles report is and whether or not she echoes Hayes’ bearish near-term views on international liquidity.

She frowns, mentioning that Hayes is extra of a frequent dealer than she is, nonetheless:

“The roles report was fairly vital. It was the largest downward revision in fairly some time, and it’s corroborated by different issues as effectively. The ISM Buying Managers’ indices are additionally exhibiting an analogous directional weak spot.”

The ISM Manufacturing PMI is a key indicator of the state of the U.S. financial system because it indicators the extent of demand for merchandise by measuring the quantity of ordering exercise at U.S. factories. Lyn continues:

“Now, whether or not that impacts Bitcoin and broader crypto, I’m extra hesitant to say. Whereas it may decelerate earnings that may impair the financial system in varied methods, it additionally typically means extra Fed dovishness, which, across the margins, is sweet for Bitcoin and crypto.”

Regardless of not making short-term buying and selling choices like Hayes, Lyn offers some credence to his outlook over the approaching quarters primarily based on a few parameters:

Tariffs might make a dent within the deficit and serve to take the wind out of crypto’s sails (“barely slower the practice for a few quarters”), and the treasury is trying to refill its normal money account (the TGA) after the debt ceiling was handed. Which means sucking liquidity out of the system, which may negatively impression threat belongings. Lyn explains:

“Mockingly, debt ceilings, once they’re a problem, are literally good for liquidity as a result of they drive all these pockets of liquidity to return into the market, however then afterward, once they refill their money ranges, they’re pulling money out of the system.

They [the treasury] count on to try this by the remainder of this quarter, to Arthur’s level, which is traditionally not wonderful for asset costs throughout the board.”

In distinction, Lyn isn’t too frightened a few broader tightening of world liquidity. She says:

“I’d say liquidity’s in a middling place as a result of the greenback is now not falling because it was earlier this 12 months, and the greenback is a extremely massive variable for liquidity, typically. A falling greenback is general good for international liquidity. On the different finish of the spectrum, China’s credit score impulse is on the upswing, which is sweet for international liquidity. So it’s type of impartial on the present time.”

Bitcoin cycles will probably be longer and fewer excessive

Whereas it’s not the proper setup for a million-dollar Bitcoin, issues may undoubtedly be worse. Lyn affirms:

NemoNemo

“I don’t suppose this cycle’s over but. I believe we’re going to see increased highs in Bitcoin this cycle. That might be later this 12 months. That might be early subsequent 12 months. There are many little variables that may have an effect on that, however up to now, we don’t see any indicators that appear to be a multi-year high.”

Actually, she explains that we’re “nowhere close to multi-year tops” primarily based on varied indicators that monitor market worth in comparison with on-chain value foundation, a “type of a measure of euphoria.”

“I believe liquidity nonetheless seems first rate, possibly not nice for 1 / 4, however it’s not an acute headwind per se, for my part, and going into subsequent 12 months, I nonetheless suppose we’re going to see most certainly increased Bitcoin costs.”

How excessive is that?

Lyn pauses and says she has no agency view. Not like different personalities within the house, she doesn’t win over extra followers by making outlandish predictions. As an alternative, she merely says:

“I believe we’re going over $150k this cycle. Now the quantity might be a lot increased than that, however I at all times attempt to begin conservatively, and it will depend on market situations at the moment.”

She believes that Bitcoin cycles are altering, and we should always count on this one to be longer and “possibly much less excessive” than earlier runs. We must also put together to see robust strikes upward adopted by intervals of consolidation, “somewhat than going to the moon and collapsing.”

“Should you have a look at what was once known as FANG shares, and now it’s the Mag7 shares, principally large-cap U.S. tech shares, they stored grinding up longer than folks thought. Worth traders have been at all times shocked that these items simply stored rising.

Magnificent Seven StocksMagnificent Seven Stocks
Magnificent Seven shares’ upward grind

“Typically they recover from their skis and have a 30% correction, typically worse. Typically they’ve a flattish, uneven 12 months, however then they hold grinding increased after they work out some steam. I believe Bitcoin may resemble that mannequin to some extent. Possibly it’s nonetheless extra unstable than that, however I do suppose we should always count on possibly longer and fewer excessive cycles on common.”

Bitcoin treasury firms: bear market catalyst?

For anybody who’s been flushed out by a Mt. Gox, China ban, or FTX-style black swan occasion that abruptly reversed most of Bitcoin’s positive factors, Lyn’s prediction might present some reduction. However is there any potential catalyst for the top of the cycle quietly chirping away like a canary in a coal mine? Bitcoin treasury firms, for instance?

Lyn factors out that now that Bitcoin is a multitrillion-dollar asset, it’s inevitable that good cash flows in. She says:

“There’s no world during which solely people personal Bitcoin and magically no massive swimming pools of capital wish to personal it. That solely is sensible when Bitcoin is a tiny market.”

She’s not involved concerning the centralization menace to Bitcoin posed by entities like Technique gobbling up BTC prefer it’s going out of fashion (Technique’s BTC holdings at the moment stand at over 628,791, simply shy of three% of all the provide). She merely shrugs and says it’s no completely different from earlier cycles:

“At one level, Mt. Gox supposedly had over 800,000 cash, and there have been fewer cash again then. In order that was an even bigger proportion of cash than, say, BlackRock or Technique has now. So whereas there’s at all times some extent of centralization issues, it’s actually not worse now than it was at intervals of occasions prior to now. So, no. I’m not likely frightened about that from a centralization perspective.”

What’s necessary to be looking out for, Lyn explains, is the quantity of leverage within the system, since “any diploma of euphoria and leverage is what causes the following downward cycle.” Bitcoin wants upward volatility to go from zero to trillions of {dollars} of worth and develop into related on a world scale; and upward volatility, Lyn warns, breeds euphoria and leverage.

“That’s while you recover from your skis and also you get consolidations and draw back volatility. There are clearly different liquidations that occur on occasion, so that they definitely may feed the following downturn, however I don’t view it as essentially completely different from prior cycles, and the present leverage within the treasury house shouldn’t be that top.

MicroStrategy has fairly low leverage relative to their Bitcoin. Metaplanet has comparatively low leverage relative to their Bitcoin. We’ll see how the others come as they go. I definitely suppose that we’ll see a washout. We’ll see quite a lot of altcoin treasury firms get washed out, and a few Bitcoin ones which can be poorly managed are going to be in danger within the subsequent downturn.”

The roaring 20s and the decade-long inflation

It was someday in the course of the COVID lockdowns that Lyn started discussing the persistent inflation that may stem from shuttering the world and inflating the cash provide. She would later characterize the 2020s as the last decade of inflation, as governments battle to rein in rising prices. Does Lyn count on this pattern to proceed?

“To some extent, I imply, we’re in 2025. We’re nonetheless above the best way the Fed measures inflation. We’re nonetheless above their official goal regardless that it has come down. Now, whether or not or not we now have one other dramatic spike comes partially down as to if power is constrained or not. It’s fairly exhausting to have main inflation with out power suppression, so something that retains the provision of power excessive is a method of preserving inflation down.”

Not like earlier many years, she says, the place we have been capable of print cash and offset it with productiveness positive factors from automating manufacturing, she sees the 2020s as “stickier” by way of common inflation; until we understand a significant productiveness improve by a expertise reminiscent of AI, though even that gained’t convey down the price of store-of-value belongings. She says:

“The issues which can be really scarce, like waterfront property, gold, positive artwork, high-quality shares, and issues like that, all go up dramatically as a result of it’s exhausting to extend these issues. So I believe going ahead, AI making, say, white collar varieties of companies cheaper can suppress not directly CPI and sure wages and expenditures that folks have.

This might be offset by ongoing cash printing, increased gold, increased Bitcoin, increased status properties, and simply really scarce issues. So I do suppose that we’re nonetheless in a sticky inflation setting, regardless that it’s exhausting to get dramatic inflation with out power shortages.”

AI and the economics of white-collar work

Since she’s introduced up AI for its productiveness positive factors, I ask if she’s involved about job losses and whether or not she believes it’s a internet constructive for humanity, being one thing of an AI skeptic myself. Lyn’s markedly extra optimistic. Similar to the runaway fiscal deficit practice, she says AI is inevitable.

“At this stage, for those who attempt to ban it in a single nation, one other will do it, and it will likely be open-sourced in some capability. Like several expertise, it may be disruptive when it hits; lots of people can lose their jobs without delay.”

She likens AI to social media in the best way the latter disrupted social interplay, and warns that it have to be used fastidiously to keep away from doing extra hurt than good. I recall studying an MIT examine, to her level, that discovered AI to be an amazing studying software; so long as folks didn’t develop into so depending on it that their intelligence drained away like blood from an open wound.

Lyn continues:

“It’s an excellent factor that we discover methods to make repetitive white-collar work cheaper and extra inexpensive as a result of that enables these folks or future generations to do different varieties of work, which is true for any time we automated textiles or farming with tractors and hydrocarbons and issues like that. It’s the identical factor besides it’s faster.”

She factors out that moveable AI is completely different from information heart AI and marvels on the mechanics of the human mind: our means to course of advanced ideas and feelings, “very excessive bandwidth senses,” and “self-healing” functionality run on simply 20 watts of energy. She enthuses:

“It’s outstanding. It’s lower than an incandescent gentle bulb. The equal quantity of processing in an information heart runs on megawatts of energy, so hundreds of thousands of watts of energy…

I don’t suppose we’re wherever close to the extent the place there’s nothing people may do so as to add worth over silicon. I believe it’s extra a case of disruption that then places extra folks into doing different issues.”

I nod, questioning whether or not my metaphorical lightbulb requires as a lot power as Lyn Alden’s large mind.

Inflation, disruption, damaged cash… oh my!

With persistent inflation, societal disruption, and damaged cash, besides, this period bears all of the hallmarks of a fourth turning, and I battle to really feel constructive about the place all of it ends. I’m wondering what Lyn thinks. Is that this an excellent time to be alive? She ponders:

“I believe so. Fewer folks die from avoidable issues than virtually ever earlier than globally. It’s not an accident that the inhabitants bubble is occurring now… For probably the most half, I contemplate it good, however it goes by waves of getting an excessive amount of, like when folks get minimize off from social connections. Individuals have far more despair now than hunter-gatherers, regardless that in most capacities, we dwell longer and are much less more likely to die from one thing random…

Expertise is polarizing as a result of, in some methods, it turns into like a winner-take-most, and to the extent that we get by this entire factor efficiently, I believe we now have to study to make use of expertise in a extra pure method than be so reliant on it. I believe finally that would be the case.”

Lyn additionally believes that AI gained’t proceed to develop and enhance advert infinitum, however will finally hit a plateau, identical to aviation did: progress inside that business has been pretty stagnant for years, following its mind-blowing takeoff within the twentieth Century. She says:

“We went from the Wright brothers to folks on the moon in a single human lifetime. However then, as soon as we hit the 70s, we slowed down. We nonetheless don’t have a jet quicker than the Blackbird. We nonetheless don’t have business aviation quicker than the Concorde. We don’t even have that anymore…

I believe in time, related issues will occur to electronics the place we’ll attain sure densities which can be exhausting to maintain dramatically bettering on, and it’ll enable us extra time to soak up what we have already got.”

Observe Lyn Alden on X or take a look at lynalden.com for in-depth evaluation and insights.



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