Crypto's Hottest Trade are Bonds
So the new guy at the Fed just ran his first FOMC, and it looks like rate hikes are on the table.
No surprise there, it's been happening all over the world.
I don't have a mortgage myself. I'm living the nomad life, slowly making my way across New Zealand. But my family back home keeps telling me their rates are climbing, and Australian yields just hit their highest level in more than a decade.
So this afternoon I sat down to listen to some pundits talk bonds and interest rates. By the end of it, I woke up from a very restful nap.
Bonds and the FOMC have always put me to sleep, and this time was no different. I still don't really get why the market moves on the FOMC at all. Investors already have a pretty good idea where rates are heading.
It's like they just hate uncertainty, so they hold their breath until the meeting's over, then the market does exactly what it was always going to do.
So I wasn't expecting much. Which is why I was genuinely caught off guard when one rabbit hole actually woke me up.
Bonds on the blockchain.
Sounds esoteric, I know. But more than $15B of bonds are already issued on these rails.
And that barely scratches the surface because every single day, more than $400 billion of bonds and credit change hands on blockchains between financial institutions.
Within the next 12 months, 10% of ALL repo transactions are expected to move onto blockchain rails. Repo is the lifeblood of financial markets, a market that clears over $7 trillion every single day. That's what's going onchain.
And then there's Tether. The company behind the world's largest stablecoin, digital dollars that live on blockchains, is now one of the biggest holders of U.S. treasuries on the planet.
More than South Korea. Soon, nearly as much as Brazil.
So yes, yields are probably going to keep climbing, and the new guy at the Fed will get up one of these months and announce a hike. These guys in the media will dissect it and the market will do its little dance.
But I feel like underneath this all, there's something a lot bigger playing out. The actual plumbing of the financial system, where these billions in bonds and government debt settle every single day, is being replaced. And again, this isn't in some distant future.
10% of all U.S. repo will be flowing through these new pipes in the next year.
The DTCC (of which, the FICC which clears and settles bond trades is apart of) are tokenizing $100 trillion of security entitlements this year.
And the strangest part is how little noise it's making (which I love). All the largest institutions on earth plus a handful of crypto companies that barely existed a decade ago are moving the bond market onto entirely new rails while our collective attentions all point the other way.
This trend of tokenization is one I have real conviction in and have based my entire trading account around.
Not where rates land next quarter, but the near-certainty that ten years from now, the way bonds and debt move through the world will look almost nothing like it does today.
And most people won't notice until it's already done in a few years time.
Are you hearing about that?
I doubt it.
That's why I've set up this newsletter to keep you in the loop with this tokenization theme playing out. Keep reading along, and I'll let you know what's playing out behind the scenes in this emerging mega trend.
Cheers!
Before I go, I do want to let you know about Steve's live session he had yesterday.
He's been my personal mentor for the last six years. Everything I know about trading on shorter timeframes and even understanding company fundamentals really came from him.
So I wouldn't be encouraging you to check out his session if I truly didn't have this relationship with Steve.
He broke down how he makes fast money trades using his options strategies.
He's made multiple 10x trades literally in weeks with his breakout system.
