BTC: Risk-averse logic in the era of debt currency

Paul Tudor Jones is a legend in the field of global macro trading, known for his bold contrarian bets at market turning points. The most decisive moment in his career was "Black Monday" in 1987, when he accurately predicted the stock market crash and achieved an annual return of about 200% for his fund through large-scale short selling. His personal profit is estimated to be as high as $100 million, making him a legend in one battle. His success is far from accidental. In 1990, he again shorted the bursting Japanese stock bubble and achieved an astonishing return of 87.4%. In addition, he also made huge profits in the European Monetary System crisis in 1992. As the founder of Tudor Investment Corporation, Jones combined strict risk control with flexible macro strategies. His philosophy of "defense is better than offense" ran through it all the time, making him not only a trading master, but also a profound influence on the development of the hedge fund industry.

Write at the beginning

One of the paradoxes of contemporary financial history is that risk does not come from risk itself, but from collective misjudgment of "safety". As Paul Tudor Jones (hereinafter referred to as PTJ) said in October 2024, "All roads lead to inflation" - not because the market likes inflation, but because the system has no choice. In the macro picture he constructed, BTC is no longer an ideal model of "future currency", but an instinctive reflection of the capital market to "escape from the credit system" under the background of the collapse of the current macro order, and an asset structure reconstruction for global investors to find a new safe haven anchor after the collapse of faith in sovereign bonds.

PTJ is not a "crypto fundamentalist". He does not understand BTC from the perspective of technological innovation or political protest, but rather examines BTC from the perspective of a macro hedge fund manager and a systemic risk manager. In his eyes, BTC is an evolution of an asset class, a "capital stress response that naturally emerges after the decline of fiat currency credibility, the intensification of debt monetization, and the failure of the central bank's toolbox." Its scarcity, non-sovereign attributes, and auditable transparency constitute a new "currency boundary." "It's the only thing humans can't adjust the supply in, so I'm sticking with it." He said.

The formation of this configuration view is not a sudden whim, but is based on a whole set of macro frameworks: Debt Trap, Economic Kayfabe, Financial Repression and Secular Inflationism. In PTJ's view, this whole system is pushing traditional financial assets into a pricing failure range, while BTC, gold and high-quality equity assets are forming a new generation of "Macro Triad" to deal with fiscal deficits, credit exhaustion and sovereign faith bankruptcy.

Debt trap and economic illusion: fiscal imbalance is the main theme of the current world

PTJ has repeatedly stressed that the current macroeconomic situation in the United States is not a cyclical dilemma, but an irreversible structural fiscal crisis. The essence of this crisis is that the government has been "prepaying the future" under the stimulus of long-term low interest rates and fiscal easing, which has pushed the debt to a level that cannot be withdrawn using conventional fiscal tools. He pointed out:

The set of key indicators he listed is very impactful:

• The total federal government debt exceeds $35 trillion , about 127% of GDP;
• The annual budget deficit is $2 trillion+ , which will continue to exist in the long term without war or recession;
• Annual tax revenue is only $5 trillion , and the debt-to-income ratio is close to 7:1 ;
• In the next 30 years, interest payments alone will soon exceed defense spending;
• According to the Congressional Budget Office (CBO), the U.S. federal debt could reach 180–200% of GDP by 2050.

He called this situation a "debt trap": the higher the interest rate, the heavier the government's interest burden; the lower the interest rate, the stronger the market's inflation expectations, the less popular the bonds, and the financing costs will eventually rebound. The logic of the trap is that every policy choice is wrong.

What is more serious is the "economic kayfabe" at the institutional level. "Kayfabe" originally comes from professional wrestling, which means that although the fights on the stage are fierce, they are actually "scripted fake fights". The audience knows that they are fake but are happy to immerse themselves in them. PTJ borrowed this term to point directly to the "performance nature" of the current fiscal and monetary policies in the United States:

This structural denial allows the market to accumulate systemic instability under the surface calm. Once a trigger mechanism appears (such as a failed Treasury auction, a credit rating downgrade, or a sudden rebound in inflation), it may evolve into a "Minsky Moment in Bonds": that is, the long-term easing and illusion maintenance suddenly ends, the market reprices risks, resulting in a violent upward yield and a collapse in bond prices. PTJ has repeatedly warned of this "turning point logic":

The problem of the current market is not whether it will collapse, but when the perception will change suddenly. As long as the "economic Kayfabe" is still on the stage, the market will not actively reprice. But when this performance is forced to end, investors will drastically adjust their positions in the short term and flee from all assets that rely on sovereign credit - US bonds will be the first to bear the brunt, and BTC may become one of the safe havens.

Reversal of Bond Belief: Return - Free Risk of U.S. Treasuries

In the past few decades, one of the "common sense" of building an investment portfolio is to allocate a certain proportion of long-term government bonds as "risk-free" assets to hedge against stock market downturns, economic recessions and systemic risks. But in Paul Tudor Jones's macro framework, this logic is being completely overturned. He publicly stated at the end of 2024:

He further explained that long-term U.S. debt is experiencing a systemic crisis of "mispricing":

The "vigilantes" mentioned by PTJ are the "Bond Vigilantes" in the market, that is, investors who actively fight against government fiscal expansion, sell bonds, and push up interest rates. Looking back at October 2023, the US 10-year Treasury yield once exceeded 5%, and the market voted with its feet to express doubts about fiscal sustainability. PTJ believes that this is just a preview, and the real turning point has not yet arrived.

He describes current holders of long-term bonds as “captives of the credit illusion”:

He stressed that this judgment is not a short-term tactical bearish view, but an exclusion item for long-term structural configuration. "Zero fixed income" is not for the purpose of interest rate differentials or avoiding volatility, but comes from the negation of the credit and pricing logic of the entire bond asset class. In an era when fiscal deficits cannot be reduced, monetary policy is no longer independent, and central banks give way to sovereign financing, the essence of bonds is trust in the will of the government. If this trust is shaken by high inflation and fiscal out-of-control, bonds will no longer be a "ballast stone" but a time bomb.

To this end, PTJ proposed a structural interest rate trading framework: yield curve steepener trading. The idea is:

• Long 2-year : The Fed is expected to cut interest rates dramatically in the next 12 months to support fiscal stimulus (“You know that we are going to cut short-term rates dramatically in the next year.”);
• Short long end ( short 30-year ): The long end will continue to rise due to market concerns about future inflation, deficits, and fiscal stability;
• Portfolio net exposure: The betting curve is transforming steeply from "inverted" to "normal", indicating a major reversal in the risk pricing logic of the bond market.

A deeper judgment is that in the macro asset allocation framework, the definition of " security " itself is being reconstructed. The former safe-haven assets - that is, US bonds - are no longer safe under the background of fiscal dominance; and BTC, due to its anti-censorship, non-credit and scarcity, is gradually being included in the core of the portfolio as a "new safe-haven asset" by the market.

BTC ’s logical reassessment: from “ marginal currency ” to “ macro anchor ”

When PTJ first publicly announced his increase in BTC holdings in 2020, it attracted great attention from traditional Wall Street. He called it "the fastest horse in the race" at the time, meaning that BTC is the most responsive asset to global monetary easing and inflation expectations. In 2024-2025, he no longer regards BTC as just the strongest performing risk asset, but as a "system hedging" tool, a necessary position to deal with uncontrollable policy risks and irreversible crises in fiscal paths.

His core views revolve around the following five aspects:

1. Scarcity is the core currency attribute of BTC

In PTJ's view, BTC's 21 million cap is an extreme form of monetary discipline, a fundamental resistance to the central bank's "arbitrary expansion of the balance sheet". Unlike gold, BTC's issuance path is completely predictable and fully auditable, and on-chain transparency almost eliminates the "currency operation space". In the context of "Great Monetary Inflation" (GMI) becoming the norm, this scarcity itself is a safe haven.

2. There is a “ value mismatch ” in supply and demand dynamics

This is the pricing model he proposed in 2020, and by 2025, he updated the framework: BTC's market acceptance has exceeded early indicators, ETF approval, institutional buying, and regulatory clarity have all increased significantly; while the marginal utility of gold prices is decreasing. Therefore, he made it clear at the end of 2024: "If I had to pick one right now to fight inflation, I would choose Bitcoin over gold."

3. High volatility does not equal high risk. The key lies in “ volatility- adjusted allocation ”

PTJ repeatedly emphasized that the risk of BTC is not that "it will fluctuate", but that investors fail to measure and allocate it in a proper way:

He pointed out that in institutional portfolios, BTC should be allocated at a ratio of 1/5 of Gold. For example, if the gold allocation is 5%, BTC should be around 1%, and positions should be established through tools such as ETFs or regulated futures. This is not tactical speculation, but a standard way of treating high-volatility assets in risk budgeting.

4. Institutional adoption is accelerating the mainstreaming of BTC

Tudor Investment Corp., where PTJ works, disclosed in its 13F filing for Q3 2024 that it holds more than 4.4

million shares of IBIT (BlackRock Bitcoin Spot ETF), with a market value of more than $230 million, an increase of more than 4% from the previous quarter

This action is not only a reflection of personal judgment, but also a forerunner of institutional funds participating in BTC allocation through compliant channels.

Number.

5. BTC is an anti- " monetary sovereignty " configuration anchor

He no longer understands BTC as an "offensive asset", but sees it as a structural hedging tool, the only non-political asset in the face of hopeless fiscal contraction, deepening debt monetization, and sovereign credit depreciation. This asset will inevitably appear in the "inflation defense portfolio" of large institutions, and its status will gradually approach high-liquidity safe-haven items such as gold and high-quality technology stocks.

“ Escape velocity ” and allocation principles: asset restructuring under the ternary hedging model

When an investor starts to look at assets from the perspective of "combined defense", he is no longer concerned with maximizing returns, but whether the system can still operate self-consistently when risks are out of control. Paul Tudor Jones's BTC configuration does not seek to "bet on prices", but to build a macro defense framework that can withstand policy misjudgments, fiscal disorder and market repricing. He defines BTC, gold and stocks as the "Inflation Defense Triad":

However, this set of three elements is not equally weighted or static, but is dynamically allocated based on volatility, valuation and policy expectations. PTJ has formed a set of operating principles under this framework:

1. Volatility-Parity:

The BTC allocation weight must be adjusted according to volatility, and usually should not exceed 1/5 of the Gold allocation. During strong cyclical turning points or liquidity crises, it is even more necessary to add option hedging to the BTC portion.

2. Structural Exposure:

BTC is not a tactical position and does not increase or decrease due to a Fed meeting or inflation data in a certain month; it is an underlying asset barrier set up for the entire "rising sovereign credit risk" logic. 3.

3. Tool implementation (ETF + Derivatives):

He circumvented coin custody and compliance barriers through IBIT (iShares Bitcoin Trust) and CME Bitcoin futures positions; the liquidity and transparency of this mechanism are also key to institutional participation.

4. Liquidity Firewall:

He advocates limiting the daily loss of BTC and setting a maximum drop exit mechanism to control the emotional trading risk in the "drastic repricing" stage and ensure the stability of the portfolio. This set of strategies ultimately builds a risk-averse defensive structure based on BTC . The role of BTC in its structure is more like an "insurance policy for the monetary system" than a "speculative target."

The trust structure of the future: from sovereign finance to algorithmic consensus

The real transition of BTC's configuration logic does not come from its price trend, but from the market's shaking of the trust structure of sovereign currencies. PTJ's core judgment is that the current global monetary system is undergoing a "silent coup": monetary policy is no longer dominated by independent central banks, but has become a means of financing for fiscal authorities, and the function of currency has slipped from a value scale and storage tool to a "directional dilutor" of government deficits. In this pattern, although gold has historical credit, it is vulnerable to tariffs, capital controls and logistics restrictions; BTC has the following institutional advantages:

1. Non - sovereign: not dependent on any central bank, resistant to censorship and confiscation;
2. Trustless Settlement : peer-to-peer value transfer without the need for a custodian;
3. Marginal demand growth ( Reflexivity ): As sovereign risk rises, demand does not grow linearly, but has an explosive repricing mechanism;
4. Time - Consistency: Regardless of macro policies, wars, and sanctions, BTC’s monetary policy is always transparent, stable, and consistent.

What PTJ sees is not just a reassessment of price logic, but also a replacement of the trust foundation of the financial structure:

This migration may be slow, but the direction is clear. When the market realizes that it is impossible to return to fiscal austerity, the central bank will continue to be forced to maintain negative real interest rates, and the discount logic of long-term assets collapses, the "extra-institutional scarcity" represented by BTC will be repriced. By then, it will no longer be a "toy of speculators" but a "shelter for lawful capital."

Conclusion: Before the macro illusion ends, choose scarcity and discipline

Paul Tudor Jones is not an emotional investor. His thinking is always based on framework, logic and allocation discipline. In the context of the 2024-2025 round of debt monetization, fiscal structural deficits and sovereign risk diffusion, his asset allocation judgment can be understood as the following three trade-offs:

1. Choose inflation-resistant assets rather than nominal yield assets;
2. Choose mathematical scarcity over government credit commitments;
3. Choose a market mechanism that can operate self-consistently rather than the illusion of policy support.

These three options converge on BTC. He does not think BTC is a perfect asset, but in the current era of "capital needs a refuge, and sovereignty is destroying its credit system", BTC is a realistic answer. As he said:

If we believe that debt will not automatically converge, deficits will not stop expanding, inflation will not return to 2%, central banks will no longer act independently, and fiat currencies will not return to the gold standard... then we must prepare a bottom position for all of this. And BTC may be the answer that can still remain after the illusion script is torn apart.