Welcome to Slate Sundays, we present new weekly features from Cryptoslate, with in-depth interviews, expert analysis, and thought-provoking enlightenment beyond headlines to explore the ideas and voices that will shape the future of code.
Lynn Alden is an exceptional person.
Widely recognized as one of the top minds in macroeconomics, you can feel some of her vast intelligence rubbing you down in conversations with Lin. I swear that by the time our chat is finished, IQ has increased some points.
Even navigating heavy topics like the fiscal deficit and the onset of AI, she is eloquent and calmer with a smile on her face than Olympic gymnasts who perform triple-back flips.
The founder of Lyn Alden Investment Strategy, general partner of Venture Firm Ego Death Capital, and heavyweights in other industries such as Jeff Booth and Preston Pysh, Lyn has been a stripe for many years as one of the most respected macro analysts in the space.
She is also one of the most recruited to interviews thanks to her razor’s insightful insights and depth of market knowledge.
As a prolific content creator, Lyn offers free investment newsletters, frequent crypto Twitter virtual corridors every day, accumulating three-quarters of his million followers who rely on timely commentary and engraved wisdom.
There’s nothing to stop this train
Lin is probably best known for her book Broken Money. This provides a comprehensive view of the history of money and a clear critique of the global financial system. She is also very vocal about her paper on the US budget deficit.
High levels of US spending are rising at a pace far beyond the government’s ability to pay, creating what Lin dubs as “slow motion runaway trains.” She explains:
“The US massive fiscal deficit continues the horizon of foreseeable futures, five to ten years, all sorts of investable time horizons. There are many reasons, many are related to political polarization.
The amount that the US government currently owes to lenders is currently more than 120% of GDP, growing around $1 trillion per quarter, making eye-catching $36.9 trillion.
Even the most highly skilled ringmasters with smoke and mirrors will struggle to obfuscate such as an astonishing level of federal debt. If there’s nothing to stop this train, can you slow it down as your ability to pay it off? She replies:
“There are a lot of things that can slow it down a bit. Tariffs are one of those things that can slow it down to bypass some of that polarization. Tariffs are basically really a big tax hike going around Congress for an executive order of emergency approval, so they temporarily bypass a part of the doom against them.”
Tariffs may help fill government funds a little higher, but Lynn says the numbers won’t add up enough to have a significant impact. The deficit is around $2 trillion, and revenue from tariffs at current levels equals about $500 billion, about $500 billion a year. “We’re already seeing exemptions,” she adds:
“The last line of ‘Stop this train’ means that the US is very financially financed. In other words, government tax revenues are highly correlated with asset prices. At this point, austerity attempts tend to be unable to address issues in order to slow the stock market or slow the economy.
I nodded, thinking about the inevitable conflict course of the situation and the huge economy. She continues:
“Structurally, there’s very little way to stop it, and it’s growing beyond its target.”
Bitcoin and the broader crypto market outlook
Turn the conversation into last week’s market slump. This follows a weaker than expected employment report triggered to former Bitmex CEO Arthur Hayes to sell a chunk of his crypto holdings. I ask Lin how important the Jobs Report is and whether she echoes her bearish short-term views on Hayes’ global liquidity.
She frowns, pointing out that Hayes is a more frequent trader than her.
“The employment report was pretty important. It was the biggest downward revision for quite some time, and it also supports others. The ISM Purchase Manager index also shows a similar debilitating direction.”
ISM Manufacturing PMI is an important indicator of the state of the US economy as it shows the level of demand for products by measuring the amount of ordering activity in US factories. Lin continues:
“Now, whether it affects Bitcoin and the broader crypto, I’m hesitant to say. It can slow down revenues that can damage the economy in a variety of ways, but that generally means prosperity of more pay that is suitable for Bitcoin and crypto around margins.”
Despite not making short-term trading decisions like Hayes, Lin gives some credibility to the outlook for the next quarter, based on a few parameters.
The tariffs could dent in the deficit and help to remove wind from the sails of the code (“slightly slow on trains in a few quarters”), and the Ministry of Finance is trying to fill up its general cash account (TGA) after the debt cap has been passed. That means sucking up liquidity from a system that can adversely affect risk assets. Lin explains:
“Ironically, when debt ceilings are a problem, they are actually good for liquidity. All of these liquidity pockets force you to go back to the market, but then refilling the cash level will pull cash out of the system.
They (the Treasury) hope to do it all the way to Arthur’s point throughout the rest of the quarter.
In contrast, Lyn is not too concerned about the broader toning of global liquidity. She says:
“I think liquidity is somewhere in the middle because the dollar is no longer falling like it did at the beginning of this year, so the dollar is generally a really big fluctuation in liquidity. In general, a dollar decline is generally good overall for global liquidity.
Bitcoin cycles become longer and extreme
It’s not the best setup for a million dollar bitcoin, but things can definitely be bad. Lin declares:
“I don’t think this cycle is over yet. I think we’ll see a high high on Bitcoin this cycle. It could be later this year. It could be early next year. There are a lot of small variables that could affect that, but so far, we haven’t seen any indicators that look like the top of the multi-year period.”
In fact, she explains that we are based on “close to the top of multiple years” based on various indicators that track market value compared to “a kind of euphoria,” which is the cost-based chain.
“I think liquidity is still decent, but maybe not that good for a quarter, but in my opinion it’s not a sharp headwind. I think there’s a good chance that Bitcoin will be expensive when we enter next year.”
How expensive is that?
Lyn pauses and says she has no solid view. Unlike the other personalities in the space, she doesn’t beat more followers by making strange predictions. Instead, she simply says:
“I think this cycle is over $150,000, and now that number can be much higher, but I’m always trying to get started conservatively.
She believes the Bitcoin cycle is changing and should expect this to be “not extreme” longer than previous runs. He also said, “We need to prepare to move upwards after a strong movement that continues with a period of integration, rather than going to the moon and crumbling.
“When I saw what was called Fang stocks, and now it’s a MAG7 stock, and essentially a massive US high-tech stock, they kept shattering longer than people thought.
“Sometimes, they get over the skis and make a 30% correction, and sometimes it gets worse. Sometimes they have flat, choppy years, but after stretching the steam, they keep grinding.
Bitcoin finance company: Bear Market Catalyst?
For those who have been washed away by the Gox Mountain, the China ban, or the FTX-style Black Swan event, which suddenly reversed the majority of Bitcoin’s profits, Lin’s predictions may bring some easing. But are the potential catalysts at the end of the cycle charting quietly like canaries in coal mines? For example, Bitcoin finance company.
Lin points out that because Bitcoin is an asset worth a few dollars, it is inevitable that smart money will come in.
“Only individuals own Bitcoin, and there’s no world that magically a large pool of capital wants to own it. That only makes sense if Bitcoin is a small market.”
She’s not worried about the concentration threat to Bitcoin brought about by entities like Strategy, as BTC distorts style (currently, Strategy’s BTC Holdings exceeds 628,791, slightly embarrassed by 3% of the total supply). She simply shrugs and says that it’s not different from the previous cycle:
“At one point, Mount Gox was over 800,000 coins, and it seems there were fewer coins back then. So, for example, BlackRock and Strategies were a larger percentage of coins than they are now. So, there is always some centralization concern, but not worse now than in past periods.
Lyn explains that the amount of leverage in the system is because “eiphoria and leverage are what causes the next downward cycle.” Bitcoin goes from zero to trillions of dollars worth, and requires upward volatility to become globally relevant. Phosphorus warns of upward volatility, breeds happiness and leverage.
“That’s when you get past your skis and you get integration and negative side volatility. They can certainly cultivate the next downturn, as there are obviously other liquidations that happen from time to time, but I don’t consider it to be fundamentally different from the previous cycle, and the current leverage of the financial space isn’t that high.
MicroStrategy has significantly lower leverage than Bitcoin. Metaplanet has relatively lower leverage than Bitcoin. We’ll see how others come. I’m sure you’ll see a washout. You can see that many Altcoin finance companies are washed away.
Inflation for 20s and 10 years
It was during the Covid lockdown that Lyn began to discuss the persistent inflation that stems from closing the world and inflated money supply. She will characterize the 2020s as a decade of inflation as the government struggles to keep costs down. Does Lin expect this trend to continue?
“To some extent, we’re in 2025. We’re still above the way the Fed measures inflation. We’re still above their official targets, despite us still coming down. Now, whether there’s another dramatic spike or not, it’s pretty difficult to do big expansion without energy suppression without energy constraints, so keeping our energy supply is to keep expanding.”
Unlike in the last few decades, she says we were able to offset that by printing money and automating manufacturing by increasing productivity. She sees the 2020s as “sticky” in terms of average inflation. Unless you recognize major productivity gains through technologies such as AI, even that will not reduce the costs of valuable assets. She says:
“The waterfront property, gold, art, high quality inventory, and all really scarce things are going to rise dramatically because it’s hard to increase those things.
This can be offset by an ongoing money print, higher gold, higher Bitcoin, higher prestige properties, and truly rare ones. So, despite the difficulty of getting dramatic inflation without energy shortages, I think we are still in a sticky inflation environment. ”
The economics of AI and white-collar works
As she cultivates AI for increased productivity, I ask if she is worried about unemployment and if she believes it is purely positive for humanity. Lin is remarkably optimistic. Like a runaway fiscal deficit train, she says AI is inevitable.
“At this stage, if you try to ban it in one country, another country does it and open source it with some capacity. Like other technologies, it can be confusing when it hits. Many people can lose their jobs at once.”
She warns that the latter has disrupted social interactions and must be used with caution so as not to cause more harm than good. I recall reading her point of MIT research, which discovered that AI is a great learning tool. As long as people were not dependent on it, their intelligence vanished like blood from the open wounds.
Lin continues:
“It’s good to find ways to make repeated white-collar jobs cheaper and more affordable, as those people and future generations can do other kinds of jobs.
She points out that portable AI is unlike data center AI, marveling at the mechanisms of the human brain. It is the ability to handle complex thoughts and emotions, “very high bandwidth senses” and “self-healing” abilities with just 20 watts of power. She gets excited:
“That’s amazing. It’s less than incandescent bulbs. Equivalent amounts of processing in a data center operates at millions of watts of power…
We don’t think we’re closer to a level where there’s nothing humans can do to add value than silicon. I think it’s a case of more confusion that puts more people on doing other things. ”
I wonder if my phoric light bulb needs just as much energy as Lynn Alden’s huge brain.
Inflation, confusion, broken money… ah!
With enduring inflation, social disruption, and broken money, this era has all the traits of a fourth turn, and I struggle to feel positive about where it ends. I wonder what Lin thinks? Is this a good time to live? She contemplates:
“I think so. Few people die from anything that is avoidable than the world. It’s no coincidence that the population bubble is happening now… I think it’s good for the majority, but people have far more depression than Hunter = Gatherers, like when people are cut off from social connections.
Technology is polarized. Because, in a sense, as long as the winner becomes the most winner and we do well with this whole thing, I think we have to learn to use technology in a more natural way than relying on it. I think that’s the case in the end. ”
Lin also believes that AI will not continue to develop and improve the infinites of advertising, but will ultimately collide with the plateau, as Aviation did. After the incredible takeoff of the 20th century, advances within that industry have been stagnant for years. She says:
“We went from Wright’s brother to the people of the moon in one human life. But when we hit the 70s, we slowed down. We still don’t have a faster jet than the Blackbird.
I think the same will happen in the electronics that reach certain densities that are difficult to continue dramatically improving.
Follow Lyn Alden on X or check out lynalden.com for in-depth analysis and insights.
