LC Ideas: Views & Insights
CIO Insights | Bonds and Bitcoin
Sunil Garg Managing Director, Chief Investment Officer
Table of Contents
Bonds and Bitcoin are an unlikely duo – one typically considered “safe” and the other the epitome of “risk” - yet both offer buying opportunities. Bond markets are flashing signs of opportunity as inflation eases and growth slows, setting the stage for rate cuts. Meanwhile, Bitcoin’s resilience and flow driven rally position it as a beneficiary of easier financial conditions. Despite being polar opposites in risk profile, both assets warrant attention in a balanced portfolio.
Inflation Easing, Despite Fed Rhetoric: While Chair Powell continues to flag inflation concerns, most recent price indicators show a cooling trend. While we appreciate inflationary threat from tariffs, the reality is that tariffs are unlikely to settle as high as feared last month – recent trade deals with the UK, China and Saudi being cases in point.
While tariffs will end being higher than the pre Trump 2.0 era, this is likely to have a growth impact rather than inflation.
Inflation Is Easing
Growth Is Slowing, Market Under-pricing Rate Cuts: A softer retail sales print and continuing easing in the labor market point to cooling economic momentum. Slower growth combined with easing inflation should pave the way for eventual rate cuts. Markets are currently pricing in just two cuts in 2025. However, given the data, the Fed may have to play catch-up. This supports a bullish case for bonds—especially long-duration.
Economic Slowdown Supports the Case for Bonds
Technical Setup in Bonds: TLT is forming a potential double bottom near the $85 level.
Scaling in to duration exposure looks attractive from a technical and macro standpoint.
TLT - Potential Double Bottom in $85 area
source: Trading View
Bitcoin as a Currency Proxy, Benefits from Flows: Rather than treating it as a speculative asset, consider Bitcoin as a currency alternative benefiting from easier monetary conditions. Financial conditions, which tightened briefly, are easing again—historically a tailwind for Bitcoin. Do note, Bitcoin has outperformed
Gold since April.
Financial Conditions - Back to Easing...
Source: Chicago FED
Loss of Momentum in Gold: Gold appears to be stalling, both in absolute terms and relative to Silver. This rotation may further support crypto-related exposure via instruments like IBIT.
Bitcoin - Outperforming Gold' Gold Stalling vs. Silver
source: Trading View
While unorthodox, bonds and Bitcoin may both offer asymmetric upside—for different reasons. One from policy catch-up, the other from monetary liquidity and flow dynamics.
