INFLATION OR DEFLATION BITCOIN WINS REGARDLESS

Hinzugefügt: 2026-05-28

[00:00:00]Good day everyone. Welcome to another episode of On Time. My name is Adam Livingston. Let's talk about why I'm still bullish on Bitcoin. Yes, it is oversold compared to every other asset out there, but that doesn't mean that Bitcoin's game is over here. It doesn't mean that Bitcoin loses. We are just getting started. So, we're going to go back to the basics today of why Bitcoin is going to win no matter what environment it's in. And I do want to start with a confession because for about 15 or 16 years now, the Bitcoiners, yes, we have been telling you that Bitcoin is an inflation hedge.

[00:00:35]But I want to gently suggest that we have all been underelling ourselves. We have been showing up to a knife fight with a coupon from Bed Bath and Beyond.

[00:00:45]Calling Bitcoin just an inflation hedge is like calling a Ferrari a cup holder.

[00:00:51]It's technically accurate, but it is wildly incomplete and it is slightly insulting to the engineering. So, this is the actual thesis when we look at the system that we're trapped in right now in this day and age. What are we actually looking at? This should have been in the brochure since day one. But Bitcoin is a convex monetary asset sitting inside of a financial system that has trapped itself between two different failure modes that it cannot escape from. One failure mode we know is inflationary debasement where the currency quietly loses its mind and then the other failure mode is deflationary insolveny and that's where the debt stack quietly loses its lunch. Both outcomes are bad for fiat and both outcomes are eventually good for Bitcoin in the long run. And this is what convexity means in plain English. You don't need one specific macro environment to win. You need the system to keep being itself. And that really is the core of the thesis, isn't it? You need the policy makers out there to keep doing the thing that they've done in every single crisis since 1971, which is to reach for the exact same lever, pull it harder than last time, and then hold a press conference explaining that this time is different. But Bitcoin is along the instability of this debt-based money. That's the trade. That's been the entire trade this entire time.

[00:02:20]Everything else is decoration. So, when you view this through the lens of whether or not risk capital is rotating on a one-year time horizon, you are losing sight of the bigger picture here, fiat is going to zero, and Bitcoin sits outside of the sovereign balance sheet.

[00:02:36]And then on top of that, it also sits outside of every single banking system's liability structure. It sits outside of any committee or discretionary supply schedule or any election cycle or any Treasury secretaries mood on a Tuesday.

[00:02:52]It is still the only major monetary asset on earth whose supply schedule does not care how the meeting went at any central bank at anywhere in the world. Bitcoin is on its own and that's why it is going to benefit from the chaos from both directions. The inflation will weaken fiat as a store of value? Absolutely. But deflation will weaken the debt structure that fiat is built on top of. And if we ever get into a deflationary environment, the policy response to deflation reliably converts today's deflationary stress into tomorrow's monetary expansion. The system has one move and Bitcoin is positioned for that exact one move. So today I want to walk you through how this actually works. Not with slogans but with actual mechanics. So let's start with the easy part today because this is the half of the equation that even your uncle can understand after two or three beers. It's pretty easy. In an inflationary regime, fiat currency loses the credibility through delution. This is not controversial. This is just arithmetic with a bad attitude. There is no way of getting around this mathematically. governments of the world, they will continue to run deficits because at the end of the day, running deficits is how you get reelected. And guess what? In addition to that, balancing budgets is how you get a concession speech. If you look at all the central banks throughout the world, you can see that they tolerate positive inflation as a matter of their very explicit policy. There's no way of getting around this. They tell you this to your face. If you look at the Federal Reserve, they have this 2% inflation target, which is a very polite way of saying to your face that they are going to devalue what your savings are. They want to make your savings worth less every single year forever. And guess what? They will call 2% healthy. And in addition to healthy, they also refer to this as price stability, which is one of the greatest rebrandings in the history of marketing. It probably beats calling a hot dog a sandwich. So, it's no stranger to anybody that people who are saving fiat currency, they are getting paid back in nominal currency that buys less than the nominal currency originally lent out. The math is very straightforward and the math is very mean to anybody who actually wants to store their wealth in fiat. If there's anybody that actually does, if you saved $100 in 1971, you saved roughly $14 of 2025 purchasing power. That's correct.

[00:05:29]the other $86 went somewhere. It didn't evaporate into thin air. It just got transferred very quietly without a receipt. So in this inflationary environment, capital that's out there, it does what capital always does. It looks for the exit door. We see this happen. Look what happens with asset prices. Obviously, real estate, equities, gold, fine art, vintage collectibles, whatever. There is a monetary premium that becomes embedded in assets just to escape this inflationary regime. If the money didn't inflate, people could save in just money. But unfortunately, they can't. So inflation makes the Bitcoin thesis obvious. Everybody knows that because the denominator of every fiat priced asset is being quietly weakened in the background while everybody is busy arguing about what should be in the CPI basket. So this is the easy part.

[00:06:22]Inflation is the loud, very obvious, embarrassing way that the fiat system fails over time. And in this scenario, Bitcoin wins by simply continuing to exist on the schedule that it's been on for its entire existence. Now, this is the hard part. This is what actually gets Bitcoiners into arguments at Thanksgiving. Deflation looks bearish for Bitcoin at first glance because cash becomes more valuable, asset prices fall. Yes, we have not experienced an actual regime of deflation since the late 1800s. I think it was from the 1870s to the 1890s. But deflation is absolutely making its way back into the conversation because of the productivity gains with AI. We are starting to see deflation rear its head in the zeitgeist in the modern dialogue. So in this situation, cash would become more valuable, the asset prices would fall, risk assets get liquidated, and Bitcoin, which does still trade like a risk asset for the moment, that could get caught in the downdraft. But this is the part that gets missed. In a leveraged economy, which is to say every kind of economy that any of us has ever lived in, deflation is not some stable resting state. Deflation is a structural emergency. And the reason is actually the debt. And the formula is very unforgiving. The real debt burden equals the nominal debt divided by the price level. So when prices and wages and collateral values and cash flows all fall together. But of course when the debt stays fixed in nominal terms, the real weight of the debt actually rises.

[00:08:01]So every dollar that you owe gets heavier in real terms even though the number on the loan documents never changes. Irving Fiser actually figured this out in 1933 and the profession has been politely ignoring him ever since because his conclusion is very very awkward. So almost 100 years ago, Mr. Fiser's conclusion was that deflation in a debt saturated economy is not self-correcting. It is selfamplifying.

[00:08:29]Falling prices increase the real debt.

[00:08:32]Increased real debt forces liquidations and liquidations push prices lower.

[00:08:38]Lower prices increase the real debt further. It is a flywheel and this flywheel turns the wrong way. And then you would just have to watch what happens across the system in that exact scenario. Collateral values would decline which means that every secured loan in the country would start to look undercolateralized. So the debt service becomes harder because the nominal cash flows are shrinking against the fixed nominal obligations. And then because of that you would see defaults start to rise. The banks will tighten their credit which would starve the next round of people who want to borrow money and it would just accelerate the contraction and then because of that tax revenue would weaken because that's a function of nominal activity but nominal activity is collapsing. So when you look at inflation, but then you look at deflation, you realize why they have to inflate. It's not even an option at this point. So this is the point I want to make. Deflation reveals something that the system spends most of its time hiding. You ever notice when people say the fiat system, what are they thinking of? They're always thinking of it as a currency system. Fiat currency. But that's not telling you the entire story.

[00:09:50]Fiat is a satanic debt engine system wearing a currency costume. The dollar isn't even a thing. The dollar is somebody else's liability. Do you ever think of that? And when the debt structure underneath cannot service itself in real terms, the currency costume starts to slip. So deflation is dangerous for fiat for reasons that have nothing to do with the actual paper currency itself, but everything to do with the leverage stack that it's holding up. So if deflation is dangerous to the system and if Bitcoin can fall during the initial liquidation phase, you might ask, okay, where does the bullcase for Bitcoin actually live?

[00:10:32]Well, it lives in the policy reaction function to such an environment. it lives. It lives in what comes next to that. The bullcase for Bitcoin during a long-term deflationary episode is not going to be that like the Bitcoin price goes up on day one or even day 30 or probably day 60. The Bitcoin price can fall. Absolutely. Look what happened in March 2020 during the liquidity panic.

[00:10:58]Bitcoin lost half of its value in a week. But the bull case always lives inside of the question of what happens on day 30, day 90, day 360. What does a political system do after a deflationary liquidity event starts to threaten regional banks? Threatens the equity market, threatens tax receipts, employment numbers heading into a midterm, and what if it threatens the ability of the Treasury to issue debt at reasonable rates? Well, guess what? You already know the answer because you have seen it every single time. The response menu to this is so consistent, you could laminate it. I'm talking rate cuts, often surprise, often emergency, often announced on a Sunday night so the futures market doesn't have to think about it too hard. Liquidity facilities under a new name so you can avoid people looking too deeply into it. Discount window letting repo interventions, bank term funding programs, quantitative easing, you know, the polite term for buying assets with currency that you typed into existence. Deflation will always create the political conditions for reflation because the system is reliant on that reflation occurring.

[00:12:08]Deflation is the crisis. Reflation is the response. Bitcoin is the asset that always survives the response and then it comes out the other side and then it trades against the denominator that is structurally larger than it was before the crisis started. You saw that happen in 2020 after the liquidity crunch. So the deflationary episode is the entry point and the reflationary response is the catalyst. And Bitcoiners, you just got to be patient. And this is why. And I want to be careful here because Bitcoin Twitter, of which I am a contributing degenerate, they have a bad habit of claiming that Bitcoin goes up in every macro environment, including weekends and solar eclipses and of course the minor planetary alignments.

[00:12:52]But that kind of analysis is incomplete.

[00:12:54]it belongs in a podcast hosted by someone whose main credential is owning a microphone. A serious thesis just acknowledges that Bitcoin can fall if you're pricing it in USD. It can fall hard. We have seen this happen time and time again. Bitcoin gets sold for dollars constantly. But the stronger claim, the one that really holds up against cross-examination is that Bitcoin benefits across complete monetary cycles. Not tick by tick. I'm talking cycle by cycle and regime by regime. In the inflationary regime, which is step number one, that's very easy to understand the selling point behind Bitcoin. There's a finite scarce amount of Bitcoin. You can print endless more dollars. Very easy for people to get. But obviously, if there is a deflationary shock, Bitcoin falls because the liquidity preference surges.

[00:13:44]We're seeing that happen right now with risk assets. They're going after the AI trade. That should surprise nobody. This is fine though. This is just the entry point. This is where the patient capital accumulates more from the impatient capital, which is the oldest trade in finance. So, we're literally just waiting for the policy response to either inflation or deflation. And guess what? With every single passing cycle, we win. Bitcoiners win because the system is designed to where we have to win. And the reason why that is is because with each aftermath of this cycle completing, the case for scarce non-s sovereign monetary collateral always ends up stronger than it was before the crisis began. Because the supply of fiat liabilities is larger and the credibility of the institutions, managing those liabilities is smaller.

[00:14:35]Every intervention is a transfer of the holders of fiat to the holders of scarcity. And Bitcoin's volatility is literally just the price of admission.

[00:14:45]It is the cost of holding this asset that sits outside of the rescue architecture. The Federal Reserve will never open a Bitcoin liquidity facility.

[00:14:55]The Treasury will never be guaranteeing Bitcoin deposits. There is no plunge protection team for Bitcoin. And that is the entire point. This is what you are paying for when you accept the volatility. You are paying for the absence of a safety net. and you are paying for it because you have looked at the safety net and then you concluded that the safety net is the thing that's going to fail. So the long-term thesis is not about avoiding the draw downs when you're pricing this in USD. The long-term thesis is about owning the asset that becomes more rational to own over time after every monetary intervention that has to happen. And the interventions keep coming because the system keeps producing the conditions that demands them. And if you are interested in actually being positioned where it will benefit you the most while we're this oversold while there is liquidity preference with other risk assets, Swan is standing by to help you alongside you every single step of your journey. Go to swan.com/noscondb to learn more. A Bitcoin wealth professional is standing by right now to help you in your Bitcoin journey.

[00:16:02]Whether you're a family, office, an individual, or a company, whoever you are, whatever you are, go to swan.com/noscve best to learn more. My name is Adam Livingston. Thank you so much for tuning in to another episode of On Time. I'm more bullish on Bitcoin than ever. I hope that you are, too. Leave a comment below. Let me know what you're thinking.

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