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The Fed Regime Change That Sets Off Bitcoin's Biggest Rally Ever! | Truth Block · Simply Bitcoin

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This is not a forecast, this is an inevitability.
0:03
I think we were probably in the early innings of a structural
0:06
decline in prices. Kevin Warsh takes over and he
0:09
has to make a decision. We're setting up a massive
0:12
supply shock. This is the most important macro
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setup Bitcoin has ever had and it has almost nothing to do with
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Powell or Warsh as people. It has to do with what AI is
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doing to the system underneath them and what that forces the
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next Fed chair to do. The system is forcing the feds
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hand. The incoming chair has been
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telegraphing for almost a year exactly how he plans to frame
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what comes next. And the only asset in the world
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AI can't replicate, dilute or disrupt is sitting at the other
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end of that decision. The match is set.
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Are you ready for the regime change?
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We're two weeks out from the most consequential Fed chair
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handoff in modern history. Jerome Powell exits May 15th.
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Kevin Walsh is ready to walk in. Yesterday was Powell's last FOMC
1:01
meeting, and the data underneath that meeting is wild.
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We'll get into that later. Bitcoin 2026 just wrapped
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yesterday in Vegas, and the supply shock thesis is getting
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louder and louder. Today.
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We're going through 2 tracks running in parallel and they
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both, surprise, surprise, point to Bitcoin.
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But before we get to either of them, you have to start with the
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floor. Everything else that's on top of
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Here's Jordi Visser on bank list.
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Yeah, but let me give it a little bit more context than
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that so that people can realize this is not just a guess.
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This is an inevitability. The digital economy has been
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merging with the traditional finance world and the old
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industrial economy now for a long time.
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I mean, honestly, since the Manhattan Project, we started to
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have a visual on what technology would would look like.
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And so imagine something and you can use Bitcoin.
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For everyone paying attention, the market cap of Bitcoin is
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still sub 2 trillion, while the market cap of the Fiat system is
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close to, I don't know, 750 trillion.
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So for everyone who's positive on it, you're looking for some
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kind of re weighting of dollars transferring from one to the
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other. Well, in the economy side, the
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US economy is now $30 trillion of that.
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Home builders is not a big portion of the growth.
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Car purchases are not a big portion of the growth.
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A big portion of the growth right now is semiconductors.
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It's artificial intelligence, it'll be robotics, it'll be all
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these different things. But these things don't involve
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labor and people as much as they used to in the past.
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And so you've had this massive distribution of wealth problem
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that's been growing literally since the beginning of the
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personal computer. So artificial intelligence gets
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into another realm. It gets into the disruption of
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the one advantage we have over technology, which is our brain.
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The other advantage we have over technology is our hands and our
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ability to move stuff. Well, that's going to be gone
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with humanoids. So this labor verse capital
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problem, which arguably is what got enough people to be angry
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enough to actually think of the digital currency and think of
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having some way to get outside the system and decentralize.
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That is what AI does, is it actually speeds up the process
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that's been going on for a long time.
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And that's why I say this is not a forecast.
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This is an inevitability. It was only a question whether
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Bitcoin would be the end result, but it has been chosen by
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people. And I always like to say there
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are three moats in the world that have been decided by people
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that have not gone and they survived the test of time, gold,
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religion and now Bitcoin. Maybe there'll be something else
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that people say this is not the chosen store of value in the
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digital economy. But as of now, between the users
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ended being the only one that is accepted as far as I can tell.
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I'll take Bitcoin as the inevitability.
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Visser's three motes lined at the end There has to be my
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favorite so far this year, gold, religion and Bitcoin.
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He's saying. These are the three things human
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beings across centuries have actually trusted to hold value
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when the systems around them are crumbling.
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Empires fall, currencies get debased, political orders break,
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gold survives, Religion survives.
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And now, against considerable odds and by the choice of
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millions of people, Bitcoin survives too.
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Visser has been one of my favorite voices this cycle.
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His Bitcoin IPO framing that what we just watched wasn't a
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top, it was a handoff from OG holders to ETF and Treasury
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companies was the cleanest read of this market I've seen
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anywhere. OK, now let's shift gears to the
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Fed regime change. Yesterday, Powell ran his last
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FOMC meeting as Fed chair and two things happened that were
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interesting, and neither of them have anything to do with rate
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cuts. The 1st is the dissent.
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This was the most fractured Fed vote since 1992.
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Steven Moran wanted a cut, 3 of the governors wanted to delete
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the language in the statement that hints at future cuts, 3
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governors wanted the Fed to publicly state it isn't leaning
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toward easing, and they lost the fight.
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This clearly isn't a stable institution.
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It's a committee that knows it's about to lose its chair, and
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it's already arguing about who controls the wording on the way
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out. The second interesting thing is
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the message Powell put on the record.
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He's not actually leaving the building.
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He's staying on as Fed governor through January 2028.
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And in his press conference yesterday, he said again that
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Fed independence is, quote, at risk.
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He isn't warning about the next rate move.
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He's warning about whether the institution can still do its job
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under the next chair. That's an outgoing Fed chair
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publicly telegraphing he's worried his replacement is being
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installed to do something the Fed isn't supposed to do.
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So the question is, who walks in the door on May 15th?
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Here's the man that's almost certainly replacing Powell,
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Kevin Wash, on CNBC last summer. And pay attention to the
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framing. What we call AI in a couple
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years, we'll just call business and AI is going to make almost
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everything cost less. And the US can be a big winner.
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And, and it's a hugely exciting moment.
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If I were to step back for a minute, if I were the president,
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what I'd be worried about is a central bank that doesn't see
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any of that, A central bank that is stuck with models from 1978
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governance from a prior period and don't recognize we could be
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at the front end of a productivity boom.
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And if I were the president, be worried that they might not see
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it and they might think economic growth is somehow going to be
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inflationary. I think we were probably in the
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early innings of a structural decline in prices can season on
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the front lines of real businesses.
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And I think if you look over the period of the next year or two,
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it's a pretty special moment. Three things more said here that
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are worth slowing down on. AI is going to make almost
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everything cost less. That's the deflation thesis in a
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nutshell. He worries of a central bank
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stuck with models from 1978 that's leaning towards
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permission to do something the previous Fed wouldn't have done.
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And then he mentioned a structural decline in prices.
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That's the cover story. If you can convince the public
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that prices are structurally falling because of technology,
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you don't have to fight inflation.
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Even when inflation is running hot, you can hold rates while
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CPI is stillwell above target. And the framing isn't the Fed
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gave up. The framing is that the Fed is
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letting productivity work. That's an extremely useful
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sentence to have in your back pocket if you're about to walk
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into a job where the labor market is dying and the Treasury
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wants you to ease. The question is whether Warsh
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actually believes this, or whether the system is forcing
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his hand, and the AI deflation thesis is what he's going to
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point his finger at while he does what he was always going to
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do. Visser has been making the case.
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It's the second. One during that period of 2009
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to 2020. I think people forget this.
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Why were rates kept at low levels?
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Well, we started that period after the great financial crisis
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with unemployment up around 10%. It took the entire decade to get
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it back down to where we are today.
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We are at a point now where the labor market has created zero
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jobs over the last 16 months. Zero.
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And if you take out healthcare, it's negative.
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So we have a weak jobs market. And the problem is the Fed has a
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dual mandate. It has to focus on inflation,
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but it also has to focus on the labor market.
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If you believe AI is going to accelerate, which I believe
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everyone does, it hurts labor in the future and it causes
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deflation in the future. Maybe not today, but you believe
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that it will have deflationary pressures in the future.
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So if you're a Fed chair and you're looking at these two,
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which is why it's critical for people to think about the fact
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that Donald Trump selected a Fed chair, that would follow
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effectively what Scott Besson has said, which is we believe
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Alan Greenspan handled the 1990s the right way.
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We believe we should be looking through any inflationary
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pressures and be focused more on the productivity gains that are
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going to come from technology. That's all well and good, but
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that is the issue that comes up is it still goes.
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People are looking for another alternative where they can make
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money. So I do believe there's more
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behind just the math. I think the narrative that'll
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come out is that we're going to have inflation.
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And I'll bring up one more thing.
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We talked about a lot Bitcoin and the importance of the ETF
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and it becomes very US centric. I view beat the true story for
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for Bitcoin to be a global asset, I believe it is the most
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important global asset in the world.
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The fact that Iran has said they'll take Bitcoin for oil,
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all of these things are important in the long term trend
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of Bitcoin being accepted as an asset.
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They're not doing it with gold, they're doing it with Bitcoin.
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Now, emerging markets that don't produce commodities are going to
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be in a lot of trouble if what we're hearing about fertilizer
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and food and all this is right, We're going to have inflationary
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pressures around the globe that could lead to, again, pressure
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on the local currency. These markets and them needing
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to fight through rates and people looking to hide their
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money again from the system in these countries where a lot of
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them are the owners and the major owners of Bitcoin.
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It might be small amounts. But I bring that up just because
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I think the anger towards the way the governments of the world
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are dealing with things is running is is is running amok.
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And I do think if we have inflation, people are
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underestimating what might happen to yields in Japan, what
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might happen to yields in Europe, what might happen to
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yields in the US? And we might get back into that.
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Can the global Fiat system handle all the debt when we have
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inflation but we can't raise rates?
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And the reason we can't raise rates because interest as a
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percentage of GDP has gotten up to high levels.
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There's a whole narrative that I think it's going to be created,
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which is not bad for stocks, it's not bad for the economy,
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but I think it's very, very good for Bitcoin.
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Now a lot of the market is pricing Warsh as a hawk, which
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means they think he will keep rates high.
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Most of Tradfi is reading him that way.
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And I get it. He has been a public critic of
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QE for years. He said low rates were
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artificially depressed. His instinct is to shrink the
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Fed's balance sheet faster, not slower.
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But I think labeling him as a hawk is a misread for two
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reasons. The first one, you just heard
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the Fed has a dual mandate. Inflation, yes, but also
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employment. Warsh inherits a labor market
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that has produced zero net new jobs in 16 months.
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Negative if you take healthcare out.
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He simply can't raise rates into that without breaking the
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second-half of the mandate. He doesn't have the room, so
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even if his instinct is hawkish, the data won't let him act on
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it. The second reason is the
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cleanest argument I heard all week, and it came from Arthur
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Hayes at Bitcoin 2026 a few days ago.
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Hayes points out that even if war succeeds in shrinking the
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Fed's balance sheet, it doesn't matter for liquidity.
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Why is that? Because the new banking rules
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that went live April first now let JP Morgan, Citi and the rest
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of the big banks absorb the Treasury debt the Fed used to
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hold. Hayes pays it to roughly $1.3
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trillion of new lending capacity multiplied roughly 3 to one
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through the banking system. That's bigger than whatever
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credit gets destroyed. On the AI side, the net effect
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of dollar liquidity is neutral and probably positive.
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So intent and outcome are two different things.
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Warsh's intent might be hawkish. The outcome is dovish anyway
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because the system routes around him.
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The hawk or dove question assumes the Fed chair has a free
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choice and he doesn't. Not in this regime.
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This is where Visser put the historical record on it.
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I put a stat up and quadrants and I just said show me the
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returns on Bitcoin in periods where we have negative real
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yields using year over year CPI relative to the Fed fund or
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three month bills. So when CPI is above the three
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month bills, start with that and then go, is the Fed raising
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rates or is the Fed at ease, meaning they're not moving or
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they're easing? And the returns are all happened
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in Bitcoin since the launch of the white paper when we've had
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negative real yields. And I don't think most people in
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the community know that, but that's 100% of the returns.
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They've all come at times when CPI year over year has been
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above the Fed funds rate. And part of the reason for that
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is the majority of the returns have occurred during QE and when
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CPI was 2% and rates were effectively 0 for that entire
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time period. Yes, there were times where they
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fell, but that was usually when the Fed was raising or something
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else was going on. So we're going to be in that
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quadrant very soon. If I'm right, if inflation
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doesn't go above, maybe it takes a little bit longer.
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But I think once inflation gets above 3 month bills, I would
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hope that what happens is the employment situation is stable,
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GDP is still good, oil prices are still high, silver is going
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higher, and Kevin Walsh takes over and he has to make a
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decision. And if his decision is I'm
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betting on AI and I am not going to raise rates even though
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inflation is above 3 month bills.
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That is the serious point in time where I think Bitcoin is
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going to go higher because I don't think the Fed chair can
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raise rates if the job market is not strong.
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Real rates are about to go negative. the Fed can't fight
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back, and the historical record on what Bitcoin does in that
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situation is crystal clear. Every Bitcoin return that has
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ever happened since the white paper has happened here.
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But there's a layer underneath the macro that makes this regime
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change different from any other rate cycle. the Fed isn't only
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choosing to cut, it's being forced to.
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And the thing forcing it is AI. For 15 years, SAS companies or
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software as a service have been some of the most valuable
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businesses in the world because once a customer signs up,
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they're locked in. The lock in is the Moat.
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AI is dissolving those moats in real time.
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When a model can build the same dashboard in an afternoon, the
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customer isn't locked in anymore.
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The market is already telling us this.
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Just look at what's happened to Salesforce, Adobe, and half the
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names that anchored the NASDAQ five years ago.
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So here's what that means for the Fed.
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That whole sector is the collateral underneath the
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private credit market estimates, but SAS exposure inside private
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credit anywhere between 25 and 50%.
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So an AI eats those moats. It isn't just an equity story,
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it's the asset base of the credit system getting marked
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down from the inside. the Fed will talk about productivity.
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What's actually happening is that the assets the lending
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system is written against are repricing towards 0, and
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somebody has to step in with liquidity to keep the apparatus
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standing. And that somebody will be
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washed. Which means the only asset class
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that doesn't have this problem, the only one AI can't replicate,
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dilute or disrupt, is the one Visser keeps coming back to.
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Real scarcity decided by people. That's what withstands the test
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of time. Now to the supply side.
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We covered this in detail in a Sailor Curve episode, so check
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that one out if you missed it, but here's Sailor restating it
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on the Nakamoto stage 2 days ago.
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And I think that the entire industry is going to accelerate
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starting now. I think there's going to be a
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Cambrian explosion. Just the past 12 weeks.
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I've seen more innovation in this space than in the previous
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five years. I think Bitcoin's going to
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rally. I, I think there's a lot of
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capital flowing into Bitcoin right now.
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And at the rate that digital credit is forming and at the
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rate you saw our buy this morning, we bought the entire
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supply last week. Then Strive announced a massive
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buy. Then there's a massive bank
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credit coming online. All the big banks, JP Morgan
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City, Schwab, Morgan Stanley, Barclays, they're all coming
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online. So I think the formation of
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you're talking about between 20 and $100 billion worth of credit
16:10
formation in the next 12 months. And there's only $10 billion of
16:14
Bitcoin naturally available for sale.
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So I think that we're setting up a massive supply shock.
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There ought to be a rally and BTCI think that'll catalyze a
16:25
rally and all the Bitcoin treasury companies, I think it
16:28
will cause a rally and demand for digital credit.
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I think there'll be a rally and bank credit.
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I think the Clarity Act will go through and there'll be a lot of
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very constructive guidance from the CFTC, Treasury and and the
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SECI think that will accelerate digital assets innovation.
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OK, so let's put this all together.
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On the macro side. You have a Fed chair walking
16:51
into a job with no room to raise rates, inheriting a labor market
16:55
that hasn't created a net job in 16 months, telegraphing for
16:58
almost a year that he's going to use AI deflation as the cover
17:01
story for whatever he does next. Inflation keeps running, the Fed
17:05
keeps holding, real rates flip negative, and that's the only
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regime Bitcoin has ever rallied in.
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Are you paying attention on the structural side?
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The reason this regime change is happening at all is that AI is
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hollowing of the asset base of the Fiat credit system from the
17:19
inside. the Fed is being forced to cut because the collateral
17:22
underneath is bad. I'm sure Warsh sees it, he's
17:24
just framing it as productivity. The honest version is that it's
17:27
a system losing its grip. And on the supply side we have
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10s of billions of dollars of digital credit forming this year
17:33
against single digit billions of naturally available Bitcoin.
17:36
Strategy isn't selling. The ETFs aren't selling.
17:39
The treasury companies aren't selling. the US government isn't
17:43
selling. You and I aren't selling.
17:46
Match, meet fuse. Now I'm not giving you a price
17:49
target, but I'm giving you the framing.
17:51
The setup is right now. Holders are already in position.
17:55
The thing the system is forcing the next Fed chair to do is the
17:58
thing Bitcoin has historically priced like air rushing into a
18:01
vacuum. 3 motes decided by people that have withstood the
18:05
test of time, gold, religion, Bitcoin.
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We're now watching one of them get chosen in real time.
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Two questions for you. Where do you stand on Wash Hawk
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Dove? Or is he trapped?
18:17
And if real rates are about to flip negative, are you
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positioned for the reprice or are you still trading the cycle?
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Drop your thoughts in the comments below.
18:25
And if this connected dots for you, smash the like button,
18:28
share it with a trad fibro who thinks Wash is a hawk and
18:31
subscribe to Simply Bitcoin so you don't miss the next one.
18:34
That's it for me. Stack accordingly and I'll see
18:37
you next week.