Original Title: Frowny Cloud
Original Author: Arthur Hayes, Co-founder of BitMEX
Original Compilation: BitpushNews
(Disclaimer: All views expressed herein are solely the author's personal opinions and should not be the basis for investment decisions, nor should they be considered as advice to engage in investment transactions.)
The deities I worship have all taken the form of adorable plush toys.
During the peak ski season in Hokkaido in January and February, I pray to the "Frowny Cloud"—the little deity who governs snowfall. The local climate patterns dictate that during the best part of the season, snow falls almost day and night, and you never see the sun. Fortunately, I also pray to the Vitamin God—a soft, cute little pony plush—who bestows upon me Vitamin D3 tablets and various other blessings.
Although I love snow, not all snow is of good quality and safe. The type of carefree, aggressive skiing I enjoy requires a specific type of snow: low wind speeds at night, with temperatures between -5 and -10 degrees Celsius. Under these conditions, new snow effectively bonds with the old snow, creating bottomless powder. During the day, the Frowny Cloud blocks specific wavelengths of sunlight, preventing slopes like south-facing ones from being "sun-cooked," which could lead to potential avalanches.
Sometimes, the Frowny Cloud abandons us fearless skiers at night. Cold, clear nights cause the snow layers to develop "layer separation" after warming and cooling, creating persistent weak layers. This phenomenon can exist in the snowpack for a long time, and once triggered by a skier's weight transferring energy, it can cause a deadly avalanche.
As always, the only way to understand what kind of snow layers the Frowny Cloud has created is to study history. On the slopes, we do this by digging huge pits and analyzing the different types of snow that have fallen over time. But since this isn't an article about avalanche theory, our approach in the markets is to study charts and the interaction between historical events and price movements.
In this article, I want to examine the relationship between Bitcoin, gold, stocks (specifically US tech giants in the Nasdaq 100 index), and US dollar liquidity.
Those who are Gold Bugs or members of the financial establishment adorned with Hermès scarves and red-soled shoes (who firmly believe in "stocks for the long run"—my GPA at Wharton wasn't high enough to get into Professor Siegel's class) (Bitpush Note: Jeremy Siegel is a towering figure at Wharton and one of Wall Street's most respected economists) are gleeful that Bitcoin has been the worst-performing mainstream asset in 2025.
These Gold Bugs sneer at Bitcoin proponents: If Bitcoin is touted as a vote against the established order, why hasn't its performance matched or exceeded gold's? The filthy fiat stock peddlers also scoff: Bitcoin is just a "high-beta" (high-risk) plaything of the Nasdaq, but in 2025 it didn't even keep up, so why should cryptocurrency be considered in asset allocation?
This article will present a series of beautiful charts, accompanied by my annotations, to clarify the relationships between these assets.
I believe Bitcoin's performance is entirely as expected.
It rides the waves of fiat currency liquidity—especially US dollar liquidity, as the credit impulse of "Pax Americana" is the most important force in 2025.
Gold has soared because price-insensitive sovereign nations are hoarding it frantically, afraid that their wealth stored in US Treasuries will be plundered by the US (as happened to Russia in 2022).
Recent US actions against Venezuela will only further strengthen countries' desire to hold gold instead of US Treasuries. Finally, the AI bubble and its related industries are not going away. In fact, Trump must double down on state support for AI because it is the largest contributor to the empire's GDP growth. This means that even if the pace of dollar creation slows, the Nasdaq can continue to rise because Trump has effectively "nationalized" it.
If you've studied China's capital markets, you know that stocks perform very well in the early stages of nationalization but then significantly underperform as political goals take precedence over capitalists' returns.
If the price movements of Bitcoin, gold, and stocks in 2025 validate my market structure, then I can continue to focus on the ebbs and flows of dollar liquidity.
Reminding readers, my prediction is: Trump will inject credit like crazy to make the economy run "hot as hell." A booming economy helps the Republican party win the election this November. As central bank balance sheets expand, commercial banks increase lending to "strategic industries," and mortgage rates fall due to money printing, dollar credit will expand significantly.
In summary, does this mean I can continue to "surf" carefree—that is, aggressively deploy the fiat currency I earn and maintain maximum risk exposure? I leave it to the readers to judge.
The Chart That Rules Them All
First, let's compare the returns of Bitcoin, gold, and the Nasdaq in the first year of Trump's second term. How do these assets' performances compare to changes in US dollar liquidity?
I will elaborate later, but the basic assumption is: if dollar liquidity declines, these assets should also fall. However, gold and stocks rose. Bitcoin performed as expected: like shit. Next, I will explain why gold and stocks were able to rise against the trend of falling dollar liquidity.
[Chart: Bitcoin (Red), Gold (Gold), Nasdaq 100 (Green), and US Dollar Liquidity (Purple) Comparison]
All That Glitters Is Not Gold, But Gold Is Glittering
My cryptocurrency journey began with gold. In 2010 and 2011, as the Fed-led quantitative easing (QE) intensified, I started buying physical gold in Hong Kong. The absolute amount was pitifully small, but it represented a surprisingly high percentage of my net worth at the time.
Eventually, I learned a painful lesson about position management because I had to sell gold at a loss to buy Bitcoin for arbitrage in 2013. Fortunately, the ending was happy. Even so, I still hold significant amounts of physical gold coins and bars in vaults around the world, and my stock portfolio is dominated by gold and silver mining stocks. Readers might wonder: Since I am a devout believer in Satoshi Nakamoto, why do I still hold gold?
I hold gold because we are in the early stages of global central banks selling US Treasuries and buying gold. Furthermore, countries are increasingly using gold to settle trade deficits, even when analyzing the US trade deficit.
In short, I buy gold because central banks are buying it. Gold, as civilization's true money, has a 10,000-year history. Therefore, no significant central bank reserve manager would buy Bitcoin when distrusting the current dollar-dominated financial system; they are and will buy gold. If gold's share of total global central bank reserves returns to the levels of the 1980s, the price of gold will rise to $12,000. Before you think I'm dreaming, let me prove it to you intuitively.
In the fiat system, the traditional view of gold is as an inflation hedge. Therefore, it should roughly track the empire-manipulated CPI index. The chart above shows that since the 1930s, gold has roughly tracked this index. However, starting in 2008 and accelerating after 2022, the price of gold has risen far faster than inflation. So, is gold in a bubble, ready to harvest gamblers like me?
[Chart: Gold Price vs. US CPI]
If gold were in a bubble, retail investors would be flocking to it. The most popular way to trade gold is through ETFs, with GLD being the largest. When retail investors frantically buy gold, the number of GLD shares outstanding increases. To compare across different periods and gold price regimes, we must divide the number of GLD shares outstanding by the physical gold price. The chart below shows that this ratio is falling, not rising, meaning the true gold speculation frenzy has not yet arrived.
[Chart: GLD Shares Outstanding Divided by Gold Spot Price]
If it's not retail investors pushing up the gold price, who are these price-insensitive buyers? They are central bankers around the world. Over the past two decades, there have been two key moments that made these people realize: US currency is only good for wiping one's ass.
In 2008, US financial titans created a global deflationary financial crisis. Unlike in 1929 when the Fed did not intervene, this time the Fed violated its obligation to maintain the dollar's purchasing power and printed money like crazy to "save" certain large financial players. This marked a watershed moment in the proportion of US Treasuries and gold held by sovereign nations.
In 2022, President Biden shocked the world by freezing the Treasury holdings of a nation with a vast nuclear arsenal and the world's largest commodity exports (Russia). If the US is willing to abolish Russia's property rights, it can do the same to any weaker or less resource-rich country. Not surprisingly, other countries can no longer comfortably increase their exposure to US Treasuries that risk confiscation. They began to accelerate gold purchases. Central banks are price-insensitive buyers. If the US President steals your money, your assets instantly zero. Since buying gold eliminates counterparty risk, what does it matter if the price is a bit high?
The most fundamental reason for sovereign nations' insatiable appetite for this "barbarous relic" is that net trade settlement is increasingly conducted in gold. The record shrinkage of the US trade deficit in December 2025 is evidence of gold reasserting its role as the global reserve currency. Over 100% of the change in the US net trade balance was attributable to gold exports.
"The goods import-export gap fell 11% from the previous month to $52.8 billion, according to data released Thursday by the Commerce Department. That pushed the deficit to its smallest level since June 2020...... Exports rose 3% to $289.3 billion in August, driven mainly by non-monetary gold." — Source: Financial Times
The flow path of gold is: the US exports gold to Switzerland, where it is refined and recast, then shipped to other countries. The chart below shows that it is mainly China, India, and other emerging economies that manufacture physical goods or export commodities that buy this gold. The physical goods ultimately flow to the US, while the gold flows to the more productive regions of the world.
By "productive," I don't mean these places are better at writing bullshit reports or formatting complex email signatures, but that they export energy and other key industrial commodities, and their people make steel and refine rare earths. Gold rose despite falling dollar liquidity because sovereign nations are accelerating the restoration of a global gold standard.
[Chart: Gold Import/Export Flow Map by Country]
Long-Termists Love Liquidity
Every era has its high-flying tech stocks. In the roaring US bull market of the 1920s, radio manufacturer RCA was the hot tech darling; in the 1960s and 1970s, IBM, maker of newfangled mainframe computers, was the market focus; today, AI hyperscalers and chipmakers are all the rage.
Humans are inherently optimistic. We love to predict a glorious future: every dollar tech companies spend today will bring about a social utopia tomorrow. To realize this vision in investors' minds, companies burn cash and take on debt. When liquidity is cheap, betting on the future is easy. Therefore, investors are happy to spend cheap cash today on tech stocks in exchange for the chance of massive future cash flows, driving up P/E ratios. So, during periods of excess liquidity, tech growth stocks rise exponentially.
Bitcoin is monetary technology. The value of this technology is only relative to the degree of fiat currency debasement. The invention of Proof-of-Work (PoW) blockchain is great, and this alone ensures Bitcoin's value is greater than zero. But for Bitcoin's value to approach $100,000, sustained fiat currency debasement is needed. Bitcoin's asynchronous growth is a direct result of the explosive growth in the US money supply after the 2008 global financial crisis.
Therefore, I say: When US dollar liquidity expands, Bitcoin and the Nasdaq rise.
The only current contradiction is the recent divergence between Bitcoin's price and the Nasdaq.
[Chart: Bitcoin vs. Nasdaq Price Trend]
My theory for why the Nasdaq did not correct in 2025 alongside falling dollar liquidity is: AI has been "nationalized" by both China and the US.
AI tech titans have sold the world's two great leaders on the idea that AI can solve everything. AI can reduce labor costs to zero, cure cancer, increase productivity, and most importantly, achieve military dominance over the globe. Therefore, whichever country "wins" in AI rules the world. China bought into this long ago; it fits perfectly with its five-year plans.
In the US, this analysis is new, but industrial policy is just as entrenched as in China, only marketed differently. Trump drank the AI "Kool-Aid," and "winning the AI race" became his economic platform. The US government has effectively nationalized any component deemed helpful to "winning." Through executive orders and government investment, Trump is blunting market signals, causing capital to flood into AI-related areas regardless of return. This is why the Nasdaq decoupled from Bitcoin and the decline in dollar liquidity in 2025.
[Chart: Nasdaq vs. US Dollar Liquidity Decoupling Chart]
Bubble or not, increased spending to "win" AI is driving the US economy. Trump promised to make the economy run hot; he can't stop just because the return on this spending might be below the cost of capital a few years later.
US tech investors should be cautious. Industrial policy aimed at "winning AI" is an excellent way to burn money. Trump's (or his successor's) political goals will diverge from the interests of shareholders in strategic companies. This is a lesson Chinese stock investors learned the hard way. As Confucius said, "Study the past to know the future." Clearly, given the Nasdaq's stellar performance, this lesson hasn't been absorbed by US investors yet.
[Chart: US PMI and Economic Growth Data]
PMI readings below 50 indicate contraction. All this GDP growth hasn't brought a manufacturing renaissance. I thought Trump was for the white blue-collar worker? No, dude, Clinton sold your job to China, Trump brought the factories back, but now the factory floor is full of AI robot arms owned by Musk. Sorry, you got played again! However, US Immigration and Customs Enforcement (ICE) is hiring (dark humor)!
These charts clearly show that the Nasdaq's rise is US government-supported. Therefore, even if overall dollar credit growth is weak, the AI sector will get all the capital it needs to "win." The Nasdaq thus decoupled and outperformed Bitcoin. I don't think the AI bubble is ready to burst. This outperformance will remain a feature of global capital markets until it isn't, or most likely until the red team loses the House in 2026 (as predicted by Polymarket). If the Republicans are The Jetsons (techies), then the Democrats are The Flintstones (retro).
If both gold and the Nasdaq have momentum, how can Bitcoin regain its footing? US dollar liquidity must expand. Clearly, I believe this will happen in 2026; let's explore how.
Making the Economy Hot as Hell
At the beginning, I said there are three pillars supporting a surge in dollar liquidity this year:
· The Fed's balance sheet will expand due to money printing.
· Commercial banks will lend to strategic industries.
· Mortgage rates will fall due to money printing.
[Chart: Federal Reserve Balance Sheet Size]
The Fed's balance sheet declined in 2025 due to quantitative tightening (QT). QT ended in December, and at that month's meeting, a new money-printing program called "Reserve Management Purchases" (RMP) was launched. I discussed this in depth in a previous article. The chart clearly shows the balance sheet bottomed in December. RMP injects at least $40 billion per month, and its size will increase as the funding needed to finance the US government grows.
