China JUST CHANGED EVERYTHING! Bitcoin Will SKYROCKET WILDLY | Jack Mallers

[00:00:00]Philadelphia Fed printed, you know, 41.4 never gets this high. Okay, surely it's time to hike rates, right? Yeah, good luck. $40 trillion in debt. Good luck.

[00:00:11]Good luck. I call And this could be what Bitcoin is smelling. Why is Bitcoin at 65K? I don't know. Could it be that all of the AI capital is starting to realize no one's getting paid back and China is a legitimate competitor that no one factored in? If China is going to be open sourcing all this how's anyone going to get paid back? Whoops. And that also the Fed is caught in a pickle and is going to have to address all the all the yields that continue to rise. Now, is it going to be deliberate yield curve control or are they going to do a round sly about way? They're going to launch the ABCDE EFG program.

[00:00:49]>> One by one, the warning lights are flashing. Treasury yields are climbing.

[00:00:53]America's debt has crossed levels that would have been unimaginable just a decade ago. China's AI models are suddenly competing with Silicon Valley's best at a fraction of the cost. And somewhere in the middle of all of it, Bitcoin refuses to back down. Jack Malers believes these aren't isolated headlines. They're pieces of the same puzzle. A Philadelphia Fed manufacturing index print of 41.4, 4 a level historically associated with overheating growth and aggressive rate hikes should in theory have markets bracing for tighter monetary policy. But theory has a problem. The United States is carrying nearly $40 trillion in debt and debt doesn't negotiate. Meanwhile, another battle is unfolding thousands of miles away. As Washington debates regulation and trillion dollar AI bets, China is rapidly closing the gap with open-source models that threaten the economics of the entire artificial intelligence boom.

[00:01:50]If the mode around AI disappears, where does all that capital go next? According to Malers, Bitcoin may already know the answer. In today's video, we'll break down why Jack Mers believes the Federal Reserve is trapped, why rising yields could force the next wave of money printing, how China's AI disruption could reshape global capital flows, and why Bitcoin may once again be acting as the world's financial smoke alarm. If you enjoy macro analysis that connects the dots before the headlines do, hit the like button, subscribe, turn on post notifications, and let us know in the comments. Is Bitcoin already pricing in the next monetary pivot?

[00:02:29]>> Um, the biggest headline from last week is this Philly Fed manufacturing index.

[00:02:34]So, here's a quick TLDDR on this because I don't want this episode to drag too much. This thing never prints above 40 as you can see. And and I'll voice over for everybody that uh is listening through the podcast waves. Uh, the tweet reads uh July Philadelphia Fed manufacturing index is up to plus 41.4 4 versus the plus 12 a.5 estimate and 10 and a half 10.3 prior. Highest headline reading since November 2021. We all knew back then what that was. That was the top tick of the Bitcoin market with new orders surging to plus 37, shipments up to plus 33.7 and employment up to plus 10. Um so the point is this thing's never above 40. last time was during that peak COVID bonanza. And usually when this thing is at these levels, the Fed has to hike rates. And so this chart was posted by Luke. This is the US 10-year yield charted over this uh Philly Fed uh manufacturing index. And when this thing goes up, so do yields because it's presumably uh highly highly highly inflationary. Well, the indicator is assuming lots and lots and lots of inflation, lots of growth, lots of hot, hot, hot, and the Fed has to cool it down and raise rates. And mind you, that's what Jerome Powell did. November 2021, this thing printed above 40. We got the fastest rate hike that we've ever seen. Um, and and that was during times of extremely hot inflation prints, right? And so, uh, what did the markets look like today? Uh, number go up, yield edition. 10-year yield up, 30-year yield up, 2-year yield up. And this is all on the back of what was a miracle inflation slowing print in June. Remember the last episode I was like inflation is down all of a sudden. Which I told you guys Worsh is not going to hike rates over my dead body. You got to be kidding me. And the point it remains the same. People say, "Oh, but Jack, what about the 1970s or what about No, guys, guys, guys, guys.

[00:04:35]There's one thing that matters. The debt levels. The debt levels matter. That's not just like a random thing that you can decide to ignore if you want. When you're that indebted, you cannot raise the interest expense on that debt level.

[00:04:50]The 10-year cannot look at the 10-year at 4.6. You cannot have it that way.

[00:04:55]Because, by the way, guess who else this impacts besides the United States?

[00:04:59]People that want a mortgage, AI hyperscalers that want to borrow trillions of dollars to go build out data centers only to get their ass kicked by China. that impacts everybody that wants to borrow money and and build and live have a credit card. So the fact that we got a plus40 print on the manufacturing index from the Philly Fed even a and yields continue to go up even after a slow inflation print because you assume oh slow inflation print yields are going to come back down the market's going to realize you know we're not in this you know hyperinflationary time.

[00:05:34]No, yields don't give a the gig is up.

[00:05:38]In my opinion, the gig is up. If they want to raise rates, they can, of course, they can do whatever they want.

[00:05:44]But, um, that will that will cause a debt spiral and send us into austerity, level of depression, recession. They're going to have to do do what? What are they going to have to do? Well, yield curve control. Like, what what have I tried to explain to you guys before? You can have the Fed print money out of thin air to buy the 10-year which drives yields down. But that's I mean you're literally printing money to subsidize the government. That's I mean that's the end game of fiat. It's like well then what are we doing here? What why would anyone hold like but you'll start to see a repricing of things like gold, a repricing of things like Bitcoin of like why am I even materially interested in this dollar thing anymore? So, we're getting to that point where the Fed and the US Treasury are going to have to start choosing the bond market over everything else. But, I mean, I thought this was awesome. Cool. Uh, Philadelphia Fed printed, you know, 41.4.

[00:06:46]Never gets this high. Okay, surely it's time to hike rates, right? Yeah. Good luck. $40 trillion in debt. Good luck.

[00:06:54]Good luck. I call And this could be what Bitcoin is smelling. Why is Bitcoin at 65K? I don't know. Could it be that all of the AI capital is starting to realize no one's getting paid back and China is a legitimate competitor that no one factored in? If China's going to be open sourcing all this how's anyone going to get paid back? Whoops. And that also the Fed is caught in a pickle and is going to have to address all the all the yields that continue to rise. Now, is it going to be deliberate yield curve control or are they going to do a round sly about way they're going to launch the ABCDE EFG program or whatever all these acronyms? I don't know. And by the way, could Bitcoin obviously go down? Listen, if if the stock market sells off 20%, if we do get some institution that goes under because of a private credit crisis or something like that, you know, Bitcoin could easily wick down in 50s, 40s, whatever, right? I'm not calling bottoms. But what Bitcoin is probably I told you guys Bitcoin will lead you down cuz it's the only free market. It's telling you the truth. It was the first down. Bitcoin was feeling the pain that everyone else is starting to feel now in February. Tells you the truth. First mover actual smoke alarm indicator. And I can't tell yet, so don't hold me to it, but we'll keep checking on Bitcoin.

[00:08:16]I mean, it's healthfully grinding its way higher amidst all of the problems that AI and equities and and uh the Fed is starting to run into. It's really interesting. It really, really is. It really, really is.

[00:08:31]>> Jack's argument is remarkably simple. In previous cycles, a manufacturing print this hot would have guaranteed higher rates and tighter financial conditions.

[00:08:40]But this isn't 2021, and it certainly isn't the 1970s.

[00:08:45]Today's economy is built on mountains of leverage from governments and corporations to homeowners and AI hyperscalers. The higher yields go, the more pressure the entire system feels.

[00:08:56]That's why Malers believes the bond market is forcing policymakers into an impossible choice. Defend the currency or defend the debt. And if history is any guide, governments rarely choose austerity when money creation remains an option. That's where Bitcoin enters the conversation, not merely as a speculative asset, but as a real-time barometer of monetary stress. But debt isn't the only crack appearing beneath the surface across the Pacific. Another development is threatening trillions of dollars in assumptions surrounding the hottest trade on Wall Street. If the first half of this story is about sovereign debt, the second half is about capital allocation. For the better part of three years, investors have treated artificial intelligence as an unstoppable force with unlimited pricing power. But what happens when a competitor emerges that is cheaper, open-source, and increasingly difficult to ignore? According to MERS, that's exactly what China is bringing to the table. And the implications extend far beyond the AI industry itself. As capital begins to question whether trillion dollar AI valuations are justified, investors may once again start searching for assets with no earnings assumptions, no management teams, and no counterparty risk. In Maler's view, that's where Bitcoin separates itself from everything else.

[00:10:15]So, a Chinese model has climbed the ranks. Uh Kimmy K3, uh which is a new model. Uh I'll just read the tweet. Big news. Kimmy K3 by Kimmy Moonshot is now the number one front-end code arena with 1679 points, surpassing Claude's Fable 5. That's a 17 place jump from Kimmy K2.6.

[00:10:37]In front end, Kimmy K3 is number one in six of the seven domains. Brand and marketing, reference based design, data and analytics, consumer product simulations, and content creation tools landing number two and only gaming behind Fable 5. And by the way, it's a fraction of the cost. A fraction of the cost. So, what did we talk about last episode? Uh, what did we expect for one?

[00:11:02]I called it. I hate to I hate to be the guy that says I told you so, but I told you so. So, what else did we say last week? We said, well, if you're a business, if you're strike, if you're any business, do you want to use the one that cost 10 times more or 10 times less? Well, it's obvious. I want to use the one 10 times less. And by the way, um I I'll also use the open source one because I can see are there any back doors? What are you doing with my data?

[00:11:29]Um so open source and it cost 10 times less. I mean, you got to be kidding me.

[00:11:34]So what did we see this week? Justin, US companies reportedly use Chinese AI models more than domestic alternatives.

[00:11:42]No Why would I? It's just a no-brainer. That's the free market at work. So then a headline that followed that today just in Trump officials are reportedly weighing blocking US access to top Chinese AI models. You say, "Okay, but you know the China version is not it's I mean it might be cheaper, but it's no open AI." No, it is though. It is. And by the way, people are saying, "Oh yeah, well that's because China is is stealing open. It's it's downloading Chat GBT and testing it out and then able to kind of reverse engineer." Okay, who gives a guess what? I don't give a I just want the cheapest intelligence I have access to. I don't care. You know who cares are? Are the people that invested trillions of dollars assuming Chat GBT had some moat that was defensible and is going to be worth $10 trillion as a company. Yeah, I feel bad for those people. Those people should have stayed humble in stack stats.

[00:12:36]They're not going to get their money back, are they? But that's that's as the world goes. That's how it works. You invested money into something that didn't work. Sorry, you should have bought Bitcoin. If people want to save money into their future without counterparty risk and without taking on risk, that's what Bitcoin is for. Stop comparing these two. Bitcoin is not going to change. It's not going The consensus rules aren't going to change.

[00:13:02]You're not going to all of a sudden wake up and there's now 42 million Bitcoin.

[00:13:06]Bitcoin is Bitcoin. Now, if you want to take risk, that's fine. You could lose it. Pretty simple. So now from David Saxs basically admitting to everything that I've been saying. I'll read his tweet verbatim. This is concerning. For the first time, a Chinese model Kimmy K3 has taken the number one on front-end code arena and is scoring at or near the frontier on other benchmarks. Meanwhile, America is tying itself in knots.

[00:13:32]Politicians and bureaucrats are banning new data centers, piling on state regulations, and pushing for new federal agencies to preapprove frontier models.

[00:13:40]This is how you lose the AI race. The rest of the world won't play by our rules if we bog ourselves down.

[00:13:46]Permissionless innovation is how America won the internet and became the technological envy of the world. We can do it again with AI while addressing risks in a targeted way or we'll watch our lead evaporate. Jack Malers isn't saying he knows exactly what happens next. He openly admits Bitcoin could experience volatility if broader markets suffer a major shock. A private credit event, a significant equity selloff, or a liquidity crisis could drag everything lower in the short term. But that's not the question he's asking. The question is much bigger. What happens when the world's reserve currency issuer becomes too indebted to tolerate higher interest rates? What happens when the bond market demands one thing while economic reality demands another? And what happens when the biggest technological boom in decades suddenly faces serious competition from abroad? Mers believes Bitcoin sits at the intersection of all three trends. It doesn't care about election cycles. It doesn't require earnings growth. It doesn't need regulators to approve a new product roadmap. It simply exists 24 hours a day, reflecting the collective expectations of millions of market participants around the world. Whether you agree with his conclusions or not, one thing is becoming increasingly difficult to ignore. Bitcoin has a habit of sensing stress before the rest of the financial system acknowledges it's there. If Mers is right, the market isn't just climbing a wall of worry.

[00:15:12]It's quietly preparing for a world where debt, money, and technological dominance are all being repriced at the same time.

[00:15:20]If you enjoyed this breakdown, make sure to like the video, subscribe to the channel, and share it with someone following Bitcoin, AI, or the macroeconomy.

[00:15:29]Turn on post notifications so you never miss an upload, and leave your thoughts in the comments below. Is Bitcoin leading us toward the next monetary regime, or is the market getting ahead of itself? Thanks for watching, and we'll see you in the next video.