What if this is the bottom?
If this is the case, then what happens when you reach the lowest point? Does everything end here, or is there something beyond? It's worth considering what lies beneath and whether there's more to discover below this level.

Author: Jeff Park

Original compilation: Block unicorn

Preface

A few days ago, influenced by rumors that Kevin Woorch might be nominated as Federal Reserve Chair, Bitcoin’s price rapidly dropped to $82,000, then briefly fell near $74,500. This volatile price movement made me realize that even among the most seasoned traders in the global macroeconomic field, there remains an underlying unease—the vigilance toward the contradictory personality of a “hawkish Fed Chair who wants to cut rates.” Because this contradiction itself embodies the duality within currency devaluation.

The theory behind currency devaluation trading sounds simple: print money, devalue currency, hard assets appreciate. But this “cheap money” narrative masks a more fundamental issue—and that issue determines Bitcoin’s success or failure: how will interest rates change?

Most Bitcoin advocates conflate monetary expansion with the appreciation of hard assets, believing that funds will automatically flow into scarce stores of value. This view overlooks a key mechanism: if you don’t understand the yield curve’s movement, cheap money doesn’t necessarily mean funds will flow into hard currencies. When interest rates fall, assets sensitive to duration—especially those with cash flows—become more attractive, creating strong competition for Bitcoin in terms of attention and capital. This indicates that the path from currency devaluation to Bitcoin dominance is not linear but depends on whether the current financial system can sustain itself or will collapse entirely.

In other words, Bitcoin is a risk premium duration (Risk Premium Duration) devaluation bet.

This is the distinction I previously made between “Negative Rho Bitcoin” and “Positive Rho Bitcoin,” representing two fundamentally different arguments that require opposite market conditions to materialize.

Understanding Rho: Interest Rate Sensitivity

In options terminology, Rho measures sensitivity to interest rate changes. Applied to Bitcoin, it reveals two very different paths:

“Negative Rho Bitcoin” performs better when interest rates decline. This reflects the continuity theory, albeit in a more extreme form: as long as the current financial system persists, with central banks maintaining credibility, lower interest rates (possibly even negative) make risk assets like Bitcoin more attractive relative to (potentially negative) opportunity costs, becoming the fastest investment choice. Think back to 2020-2021: Fed rates dropped to zero, real interest rates plunged deeply into negative territory, Bitcoin surged, becoming the most attractive alternative to holding cash.

Conversely, “Positive Rho Bitcoin” performs better when interest rates rise or when volatility around the risk-free rate itself surges. This is the “break” theory, where the foundational assumptions of the financial system are shattered, the concept of a risk-free rate is challenged, and all traditional assets must be re-priced for their cash flows. For assets like Bitcoin that do not generate cash flows, this re-pricing has minimal impact, while longer-duration assets suffer catastrophic losses.

Currently, Bitcoin’s price is trapped, directionless, with no clear breakout volatility, perhaps indicating investors are unsure which theory is more relevant. For most Bitcoin maximalists, this answer is unsettling, because concepts of inflation, and the closely related deflation and interest rate relationships, are often severely misunderstood.

Two Types of Deflation

To determine which Bitcoin theory holds sway, we need to distinguish between two different types of deflation:

When productivity improvements lead to falling prices, it results in benign deflation (Good Deflation). AI-driven automation, supply chain optimization, and manufacturing process improvements: these can lower costs while increasing output. This form of deflation (sometimes called supply-side deflation) is compatible with positive real interest rates and stable financial markets. It favors growth assets over hard currencies.

When credit tightening causes prices to fall, it results in malignant deflation (Bad Deflation). This kind of deflation is disastrous: debt defaults, bank failures, chain reactions of liquidation. Demand-driven deflation destroys the government bond market because it requires negative nominal interest rates to prevent total collapse. Stanley Druckenmiller once said, “The way to create deflation is to create an asset bubble,” explaining how malignant deflation destroys duration assets and makes hard currencies essential.

We are currently experiencing benign deflation in the tech sector, while avoiding malignant deflation in the credit markets. This is the worst environment for Bitcoin: enough to sustain growth assets’ attractiveness and maintain government bond credibility, but not enough to trigger systemic collapse. It’s the perfect breeding ground for extreme distrust in the Bitcoin market.

When Cheap Money Doesn’t Flow into Hard Currencies

Currency devaluation (money supply exceeding productive output) is happening. As previously noted, precious metals prices have risen due to dollar weakness, reflecting this trend. Silver and gold prices have soared to record highs, confirming that the dollar’s purchasing power for tangible goods is declining.

But Bitcoin has not followed precious metals higher, because structural resistance exists for Bitcoin facing negative interest rates: when rates are only moderate or low—not catastrophic—Bitcoin must compete with other long-duration assets for capital allocation. And these competitors are enormous in scale.

The Three Major Competitors for Bitcoin’s Survival

In a low-to-moderate interest rate environment, Bitcoin faces competition from three asset classes that absorb what might otherwise flow into hard currencies:

1. AI and Capital-Intensive Growth (Total Market Cap > $10 Trillion)

AI infrastructure development is the most capital-intensive growth opportunity since electrification. Nvidia alone has a market cap over $2 trillion. The broader AI value chain—including semiconductors, data centers, edge computing, and power infrastructure—approaches a $10 trillion market cap, with software-enabled AI potentially even larger.

This is benign deflation: prices fall due to productivity gains, not credit contraction. AI promises exponential output growth while marginal costs decline. Since capital can fund these productivity miracles that generate real cash flows, why invest in zero-yield Bitcoin? Even more troubling, AI industry demand for unlimited capital is surging, and this rapidly evolving, large-scale arms race is closely tied to national security.

In a low-interest environment, such growth assets—especially with government subsidies—may attract significant capital because their future cash flows can be discounted at favorable rates. Bitcoin, lacking cash flows to discount, only has scarcity. When other options fund infrastructure for general AI (AGI), Bitcoin struggles to attract investors.

2. Real Estate (Over $45 Trillion in the US alone)

The US residential real estate market exceeds $45 trillion; the global real estate market approaches $350 trillion. When interest rates fall, mortgage costs decrease, making housing more affordable and pushing prices up. Housing also provides rental income and enjoys significant tax advantages.

This falls into the realm of malignant deflation: if falling house prices are driven by credit tightening rather than productivity declines, it signals systemic crisis. But in a low-interest environment, housing remains the primary wealth store for the middle class. It’s tangible, leveragable, and socially connected—unlike Bitcoin.

3. US Treasury Market ($27 Trillion)

The US Treasury market remains the largest, most liquid capital pool globally. Unpaid debt exceeds $27 trillion (and continues to grow), backed by the Fed, denominated in the world’s reserve currency. When interest rates decline, durations lengthen, and Treasury yields can become quite attractive.

The key point: true deflation would cause the Treasury market to collapse. At that point, negative nominal rates would become inevitable, and the concept of a risk-free benchmark would vanish. But we are still far from that scenario. As long as Treasuries offer positive nominal yields and the Fed’s credibility remains intact, they can absorb large institutional capital—pensions, insurance companies, foreign central banks—that Bitcoin can never reach.

Zero-Sum Reality

These three markets (AI growth, real estate, and Treasuries) total over $100 trillion. For Bitcoin to succeed in a negative Rho environment, it doesn’t mean all three must collapse, but their relative attractiveness compared to zero-yield investments must diminish.

This can happen in two ways: either interest rates plunge deeply into negative territory (making holding assets extremely costly—“pay to save”), or these markets begin to collapse (making their cash flows unreliable).

We are not seeing either scenario now. Instead, we are in a system where:

• AI is creating genuine productivity growth (benign deflation, favorable to growth assets)
• Real estate remains stable in a manageable interest rate environment (malignant deflation is contained, supporting the housing market)
• Treasury yields are positive, and the Fed’s credibility remains strong (benign deflation benefits duration assets)

Bitcoin is caught in the middle, unable to compete with those assets that generate cash flows when discount rates are still in the “golden zone” (not low enough for zero yields to matter, not high enough to destabilize the system).

Why Kevin Woorch Matters

This raises the question of monetary policy architecture. Appointing someone like Kevin Woorch, who has proposed “inflation as a choice,” to lead the Fed would mark a fundamental shift in policy paradigm—away from the post-2008 “low rates for the sake of low rates” model.

This is the message he conveyed in summer 2025:

Woorch represents a new Fed–Treasury agreement that recognizes the moral hazard of implementing quantitative easing while paying interest on reserves (IORB). It’s essentially capital theft dressed up as monetary policy. The Fed creates reserves, stores them at the Fed, and pays interest on funds that never enter productive economic activity. It’s a subsidy to the financial sector with no real benefit for economic growth.

A Fed led by Woorch might emphasize:

• Higher structural interest rates to prevent financial suppression
• Reduced intervention in the balance sheet (less large-scale QE)
• Closer coordination with Treasury on debt management
• Reassessment of the IORB mechanism and its fiscal costs

This sounds terrible for negative Rho Bitcoin: moderate interest rates, reduced liquidity, more orthodox monetary policy. And that may indeed be the case (though I suspect the neutral rate remains below current rates, Woorch would agree, and we should expect rate cuts, perhaps not all the way to zero).

But it’s extremely bullish for positive Rho Bitcoin because it accelerates the liquidation process. If you believe debt growth is unsustainable, if you think fiscal dominance will ultimately override monetary orthodoxy, if you believe risk-free rates will eventually prove fictitious, then you want Woorch. You want the façade to be torn down. You want markets to face reality rather than limp along for another decade. You want risk pricing driven by industrial policy rather than monetary policy.

Positive Rho Scenario

Positive Rho in Bitcoin means the foundational assumptions of the financial system are shattered. Not gradual decline, but total collapse. This implies:

Risk-free rates become unreliable. This could be due to sovereign debt crises, conflicts between the Fed and Treasury, or a split in reserve currencies. When all asset pricing benchmarks lose credibility, traditional valuation models break down.

Duration assets face catastrophic re-pricing. If discount rates surge or currencies devalue, long-term cash flows become nearly worthless. Over $100 trillion in duration-heavy assets (government bonds, investment-grade bonds, dividend stocks) will experience the most severe re-pricing event since the 1970s.

Ironically, Bitcoin’s lack of cash flows becomes an advantage. It has no earnings expectations, no coupons to devalue, and no yield curve to anchor market expectations. Bitcoin doesn’t need to be re-priced against failed benchmarks because it was never priced against them in the first place. It only needs to maintain scarcity when everything else proves to be excess or unreliable.

In this scenario, precious metals respond first to the crisis, while Bitcoin reflects the post-crisis landscape. The current commodity spot devaluation will converge with the future yield curve devaluation. Milton Friedman’s dichotomy—money supply expansion causing inflation and dominating asset pricing—merges into a unified force.

Ideological Insights

Returning to our earlier framework: metal prices tell you that spot devaluation is happening; Bitcoin will tell you when the yield curve itself is breaking.

All signs point to: the crazy K-shaped economy is leading us toward destruction, while socialism is rapidly rising—precisely because Bitcoin’s three major competitors threaten the welfare of the global middle class: housing affordability, income inequality driven by AI, and the asset-labor income gap—all nearing critical points. Once society rejects the failed social contract of financial and labor devaluation, a fundamental transformation is imminent.

And this is where Fed ideology begins to play a role. A true understanding that monetary policy is not isolated but jointly shapes national industrial capacity, capital formation, and global competitiveness—such a Fed chair would not recklessly pursue low rates. This is the worldview before the Volcker era and before QE: interest rates are a strategic tool, not a sedative. Capital pricing should serve productive growth, not subsidize financial abstractions.

This stance makes the “awkward middle ground” less stable, because trillion-dollar issues become unavoidable: will the Fed restore financial repression, pushing rates near zero to sustain asset prices and fiscal solvency, reigniting negative Rho Bitcoin theories? Or will debt, geopolitics, and industrial realities force the Fed to confront the fictitious nature of risk-free rates, ultimately leading to positive Rho Bitcoin?

This convergence signals a systemic shift: Rho becomes a leading indicator (while the dollar’s weakness becomes a lagging indicator), because deflation is explanatory.

When artificially created “perpetual” fails, when coordination replaces illusion, and all benchmarks are revealed as purely political rather than sustainable eternities, the true moment for Bitcoin will arrive.

Honestly, I don’t know if we are truly at the bottom now, and of course, no one can really claim to know (though technical analysts will always try). But one thing I do know from history: bottoms almost always coincide with fundamental shifts in market mechanisms that fundamentally reshape investor behavior and expectations. Though hard to see at the time, they become obvious in hindsight. So if you tell me that, in retrospect, this marks the arrival of a new world order—where the most innovative Fed chair leads a weaponized Treasury to reshape the “central bank interdependence” social contract—then I can’t think of a more poetic, inspiring, and satisfying omen that the final ascent is imminent.