Author: Jeff Park

Compiled by: TechFlow

Since last November, I have been one of the few voices expressing caution about the Strategic Bitcoin Reserve (SBR). Therefore, it is not surprising to me that we are currently experiencing one of the fastest Bitcoin declines in history.

However, for those with foresight, this is a rare opportunity. Next, I will share the specifics of this opportunity with you. But before that, we need to first understand the root of the problem in order to treat it effectively.

The failure of the SBR lies in the fact that its hastily announced announcement did not pave the way for Bitcoin to become the ultimate global store of value (SoV).

This is because a true SBR must rely on multilateral cooperation. And it is the lack of such cooperation that has led to the sell-off in the market, led by Japan today.

As an important part of the global financial system, Japan cannot be left behind in the new era of the Bretton Woods 2.0 system. In this new system, the entire global financial structure dependent on arbitrage needs to be readjusted.

However, the current conditions are clearly unable to achieve this goal, so I am more inclined to stop the effort to treat the SBR as the ultimate goal. Once it is clear that the SBR project is purely for political purposes, it loses the "decentralization" and "non-political" characteristics inherent in Bitcoin. At the same time, we also risk angering Japan, as Japan has been providing funding to the US for decades through its own financial repression.

An appropriate strategic reserve should have the following characteristics:

• Legislative support: It must be legislated to ensure the long-term stability of the policy. Looking at the example of ESG (Environmental, Social and Governance) policies quickly unraveling after a new president took office, we can see the limitations of executive orders. This is also why I call the current SBR the BITO (Bitcoin Options ETF) moment, rather than the IBIT (Bitcoin Spot ETF) moment. This transition, though imperfect, is still progress.

• Programmatic solution: A collective programmatic mechanism must be adopted, rather than a freely discretionary policy. This can avoid concentrating risks on public officials. After all, no one wants to take risks when Bitcoin is at its peak, especially when that risk may result in personal losses but benefit the public.

• Global collaboration: Multilateral cooperation on a global scale must be required to ensure that our allies are not left behind as they explore new territories beyond the Bretton Woods system (see my Venn diagram).

Currently, Japan is completely rejecting the global arbitrage system. Just as the US cannot tolerate long-term interest rates above 4.5%, Japan also cannot bear long-term interest rates above 1.5%.

When Trump threatened to impose tariffs on Japan, which could lead to a rise in Japan's long-term interest rates, it had an adverse impact on the US stock market. But the impact on the cryptocurrency market is even more severe. The reason is that when stocks become unusually cheap, the increased capital cost of institutional investors makes it more difficult to invest in Bitcoin.

For example, Tesla (TSLA)'s stock price has already fallen more than 50% from its all-time high, which means the attractiveness of Bitcoin needs to compete with Elon Musk's capital, which is clearly an undesirable situation.

Trump is well aware of this, which is why he mockingly said "Who knows?" at the end of the White House crypto summit, and joked about the motto of the strategic reserve: "Never sell your Bitcoin."

His real purpose is not to promote Bitcoin, but to achieve his political goals by creating market volatility. And this dramatic manipulation has allowed me to foresee the market's decline.

However, there is also good news. Ultimately, market liquidity will recover. We know that Trump will stop at nothing to drive the economy, and the global M2 liquidity indicator has already started to rise. Once the market can rationally accept a lower 10-year interest rate, Bitcoin will become the fastest "tax-free racehorse". Although we cannot know exactly when this moment will come, the good news is: we actually don't need to know. Why? Because the answer is already written in my article:

"The launch of Bitcoin ETF options marks the first time the financial world has achieved regulated leveraged trading on a truly scarce perpetual commodity. Options do not create the 'value of money', but create the 'liquidity of money', and the multiplier effect of delta may be extremely favorable to those betting on 'extremely unlikely long-term events'."

Formula:

lim (x→∞) ((x+0)/2) = ∞ (and the price of x has just dropped significantly)

TechFlow note: This formula expresses the potential upside of Bitcoin's price. The "x" in the formula represents Bitcoin's current price, and "lim (x→∞)" indicates the possibility of the price tending towards infinite growth over time.

In other words, the current market adjustment has made Bitcoin's price cheaper, providing long-term investors with a low-cost opportunity to enter the market. The implication of the formula is to emphasize that Bitcoin's long-term value may far exceed the current market volatility.