TLDR of my most recent article 🧵 A long-term debt cycle progresses through stages: - early expansion (sustainable debt growth) - bubble formation (unsustainable borrowing) - market top (debt burdens peak) - deleveraging (credit tightens, asset prices fall), and reflation/recovery (policy stimulus restores growth) Currently, the U.S. exhibits late-cycle characteristics, with national debt reaching $36 trillion by March 2025—up from $34 trillion in 2023—driven by post-COVID deficits and decades of leverage accumulation. The Federal Reserve’s rapid rate hikes from near 0% to 5.25%-5.50% (maintained as of March 2025) have inverted the yield curve, signaling potential recession risks and tightening credit, particularly affecting interest-rate-sensitive sectors like housing and small businesses.

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How a rotational top in equity markets could play out: - The S&P 500, led by mega-cap tech firms, contrasts with the struggling Russell 2000, composed of smaller, leveraged companies. It suggests a possible late-cycle shift where small caps might briefly surge before a broader deleveraging, echoing historical tops like 1929 and 2008. For the crypto space, this means an initial decline during deleveraging due to liquidity crunches (e.g., Bitcoin’s 50% drop in March 2020), but potential gains if the U.S. resorts to money printing, positioning Bitcoin as a "digital gold" hedge against inflation.

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