1️⃣ Comma Partners: January 2025

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Devin here, coming back at you with the January update for Comma Partners.

Volatility was the name of the game for January.

I think volatility will be the name of the game for 2025.

Doctor’s orders?

Patience.

State-of-the-union

For the month of December:

Crypto:
- BTC +9%
- ETH (-1%)
- SOL +22%
Equities:
- S&P 500 +2%
- NASDAQ +2%

Trump hath arrived

And the market liked it.

46 executive orders, a presidential memecoin on Solana, DOGE in action, pro-business and pro-crypto cabinet members, an EO to “strengthen American leadership in digital financial technology,” a potential sovereign wealth fund, tariffs of all stripes - in effect (China, 10%), planned and paused (Mexico and Canada, 25%).

One takeaway

If I had to summarize my current view of where we are today, how we got here, and where we’re going for the rest of the year, it would be this (heavily informed by Jeff Park):

Demand for USD as international trade currency makes USD too strong. But enables US to borrow long-term very cheap. Enables cheap international goods due to strong USD. Drives trade deficit. Hollows out US manufacturing sector.
Result: need to onshore jobs again in blue manufacturing states that flipped red. Enter tariffs. This makes goods more expensive. Drives USD higher (?), which challenges exports as US-made goods become even more expensive internationally.
Need Plaza Accord 2.0 to weaken USD. Restores competitive strength of US to become export economy. Use tariffs as leverage to negotiate to get foreign countries to buy long-dated US bonds -> drive yields lower -> weaker USD.
The Fed has lost control of long end of yield curve. When they cut, market called bluff and sent long-term rates up -> strong USD. Fed won’t be able to weaken USD, President must via other means (fiscal policy, AKA tariffs & negotiations).
End game = lower 10-year rates. Drives liquidity searching risk assets.
Tax cuts would be fuel to fire. More liquidity.
Then, China can stimulate into their struggling economy. More liquidity.

The world is hanging on Trump’s every word. Decisive action will cascade throughout the global economy.

Strong statements, uncertain action - hence the volatility.

But in crypto, volatility is a feature, not a bug. (Excuse the way overused cliché, but it just works.)

So, to navigate the volatility, we must develop a longer-term view. Let’s call it an ~6- to 12-month view, nested within a 5- to 10-year view.

The 5- to 10-year view

My view here remains the same.

Remember:

GDP growth = labor force participation + productivity + debt

Aging population + declining birth rates → declining labor force.
Declining labor force → rising debt to fund deficit spending to juice GDP.
Rising debt levels to juice GDP → printing liquidity to cover skyrocketing debt payments.
Printing liquidity to cover skyrocketing debt payments → tailwinds for risk assets as investors seek to outperform monetary debasement & inflation.

This happens until and unless AI and other technological innovations materially drive productivity and fuel true, organic, positive-sum GDP growth.

I believe we’re still years (2? 3? 5? (but probably not much more than that)) away from starting to see a broad-based impact.

And it’s going to take a lot to turn this debt-loading, money-printing ship around, so I think it will be a handful of years after we start to see this broad-based impact that these foundational dynamics will truly shift.

The 6- to 12-month view

I’m reading The Fourth Turning, and color me convinced that the world operates in cycles much more than we think.

So, where are we in the cycle?

The short of it is that I think we’re still improving in the two metrics that matter most: the USD (heading lower) and liquidity (heading higher).

It will be a bumpy, volatile ride, but I think we should be patient.

The USD

I said it above, but if you need more convincing, check this out ⬇️

More important than short-term rates (controlled by the Fed) are longer-term rates (determined by Mr. Market).

As mentioned above, when the Fed cut rates in December, the market called their bluff, and the 10-year rates actually went up.

This means that Trump and Bessent have to take things into their own hands. They’ve even said as much.

I think tariffs are the threat to get China (and others) to the table. They’ll strike a deal that ends in lower long-term rates, whether it’s via selling USD reserves, buying long-dated US bonds, or something else, long-term rates will come down, along with the USD.

The market is already sniffing this out.

China’s economy is deeply struggling. But they haven’t dared stimulate for fear of tanking the yuan even further.

I believe Trump wants to strike a deal, using tariffs as leverage.

I believe the USD continues to come down, which gives China (and the rest of the world) breathing room to support their struggling economies.

Let’s not forget that it’s not just China that’s struggling. The rest of the world is, too. Global GDP has basically halved over the last quarter.

The Bank of England just cut rates from 4.75% to 4.5% - their lowest since June 2023. Markets are now pricing in the likelihood of another 75 bps of cuts this year.

I think we’ll see more of this.

Liquidity

More liquidity is my forecast for the rest of 2025.

But what did it do over the last month?

We’ve ticked up after declines in Q4 2024.

Latest data show that global liquidity continues to improve: (-0.3%) (3-month annualized) vs. a (-5.7%) January low. Liquidity levels are also up slightly year-on-year (+1.9% 12-month).

Bitcoin has run ahead of liquidity, so there is some risk to it stalling out until and unless we get continued liquidity growth like I think we will.

I think this risk is mostly one of timing - potentially chopping around or even coming down a bit (which we’ve seen over the last week or so) before we continue to move upwards again.

The fact that BTC has held above $90K all 6 times it’s dumped in the last 3 months I think is very bullish. This $90K level seems to mark a psychological/structural resistance level

At this point, I don’t believe the risk of the cycle being over is very high, for reasons I’ll get to a in a minute.

What about inflation?

Okay, Devin. I get it. You’re all bulled up.
But what about inflation? Won’t tariffs send inflation rocketing? Won’t this cause the Fed to raise rates again? Is this easing cycle all over?

I saw take from Andreas Steno Larsen of Steno Research that I found interesting and a bit counterintuitive: that tariffs may in fact be more of a drag on growth than a spark for inflation.

Tariffs weigh on US-denominated companies/business operating outside of the US, in two ways:

Companies may in fact have to pay these tariffs to import into the US, hurting financials
On top of that, until the USD weakens, foreign earnings are hurt by FX conversion back to USD

There’s a chance the brunt of these tariffs is carried more by corporations (hurting growth) than individuals (driving inflation).

I think this is a possibility that not many are accounting for.

While some inflation metrics have ticked up (goods, ~20% of CPI), shelter (~35% of CPI) is falling dramatically, and looking likely to continue.

Plus, Trump wants to “drill baby, drill.” Oil materially impacts inflation, both directly via energy prices, as well as indirectly via prices for goods and services. Oil prices have fallen ~10% since Trump took office.

On the margin, I’m less worried about inflation than most.

The market is only pricing in ~1 Fed rate cut this year.

I’ll take the over.

Especially now that the latest jobless claims and non-farm payrolls came in weaker than expected yesterday and today.

Screenshot%202025-02-07%20at%2010.59.48%E2%80%AFAM 2.jpg

The Fed even keeps on saying that they still believe rates are “restrictive.”

I’ll take the over.

And how about the business cycle?

All this talk about the monetary cycle, but how about the activity on the ground?

The business cycle is looking strong.

The ISM has started to turn upwards, forward expectations and optimism are booming, and new orders are rising.

While monetary conditions set a backdrop for crypto, business conditions round out the picture.

The ISM is just now approaching 50 for the first time in over 2 years - the point at which crypto has historically run hot.

The ISM above 50 has historically also been a really strong signal for non-Bitcoin altcoins.

In January, while majors like BTC and SOL saw gains, many of the leading altcoins had material drawdowns:

ETH DeFi: down approx. (-10%) to (-15%)
DePIN: down approx. (-30%)
AI (crypto AI, not super-scaler AI): down approx. (-30%) to (-80%)

There’s lots of commentary on crypto Twitter saying that we may not get an alt season this cycle.

I hold a different view. I think the reason we’ve seen altcoins lag is two-fold:

We’ve had such strong catalysts for the majors with Trump’s pro-crypto stance, executive orders, discussion of a national strategic Bitcoin reserve, presidential memecoin launches on Solana, etc.
The business cycle has been muted and is just now approaching levels that have historically signaled strong altcoin outperformance

I think we will still see an altcoin season. I don’t think it will be as dramatic as past cycles given the catalyst for the majors is still so strong, but I do think we see it, particularly as new liquidity coming into crypto picks up alongside global liquidity flows and business cycle strength.

Strong business cycle → more profits in pockets → more investment → tailwinds for risk assets.

Doctor’s orders: patience

I think we have at least another ~6-9 months for the business cycle to run.

Layer on top of that the potential for rising liquidity unleashed by lower long-term rates and a weaker USD.

Of course, this all depends on how Trump handles this whole tariff situation.

But I remain pretty convinced that he’s committed to exactly the thing that would send risk assets (including crypto) higher: lower long-term rates, a weaker USD, lower taxes, less regulation, favorably pro-business conditions, strong corporate profit.

He’s said as much.

And we’ve seen this before.

In an ever-more-interconnected world, where information, misinformation, and interpretation travel at the speed of light, where the economic fates of nations are intertwined, and where we’re less than three weeks into a new president’s second term, volatility is the name of the game.

Doctor’s orders?

Patience.