Eurodollar trader and Layered Money author Nik Bhatia on the realization that changed his base case: the next wave of Bitcoin demand comes not from asset rotation but from new money created by the bond and repo markets, including sovereign bonds financed in London's eurodollar market.
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I reached out to Nik Bhatia over the holidays after watching a video he put out breaking down how MicroStrategy's convertible bonds and the repo market were quietly reshaping the flows into Bitcoin. Nik is a former Treasury and credit trader turned author of Layered Money and Bitcoin Age, and he spends his days in the part of the financial system most people never see: the eurodollar plumbing, the repo desks, the credit machinery that actually creates money. He came on weeks before the new administration took office with a thesis that had genuinely surprised him, and changed his base case for how high Bitcoin can go.
The short version: the old story about the bond market "rotating" into Bitcoin is obsolete. What's replacing it is new money, conjured by the same offshore-dollar credit system that underpins the entire global dollar order. That system is the eurodollar market, and if you want the foundation underneath everything Bhatia describes here, it's the engine at the center of The Petrodollar, Explained.
Bhatia wanted to clear the biggest misconception out of the way first, because it shapes everything else:
"The biggest misunderstanding in the outside world is that bitcoin challenges the dollar to the point where it threatens to kill it. But that's not the full picture. If the United States wants to survive very long term, it's beneficial for the US to be involved in bitcoin."
His evidence is refreshingly free of ten-year game theory. He's a price guy, and since the election the dollar has gone up and Bitcoin has gone up at the same time, while the euro, the Canadian dollar, the Aussie dollar, and the yuan have all weakened against it. Capital is flowing toward the US, which strengthens the dollar, and Americans buying Bitcoin and starting Bitcoin companies pulls in still more capital, which strengthens it further. In the short to medium term, he sees the two assets rising together, not fighting. The country that tries to suppress Bitcoin to protect dollar dominance is being shortsighted, because someone else will simply win the capital flight instead. He reaches for the Internet as the historical template, a story he tells at length in Bitcoin Age: the US government effectively founded the open Internet, prototyping a closed network through ARPA before the Defense Department itself adopted the open TCP/IP standard. Bitcoin started open, and after fifteen years the US is realizing it should be its home. That framing made his base case for a strategic Bitcoin reserve, weeks before the inauguration, more than a coin flip.
Here is the realization that reorganized his thinking. For years the bullish case rested on rotation: the bond market is a hundred trillion dollars, the logic went, so some of that money will sell bonds and buy Bitcoin. Bhatia now thinks that narrative is dead, and he can explain why from inside the desk. When MicroStrategy issues a convertible bond, the fund that buys it usually doesn't sell other assets to fund the purchase. It finances the position with repo: a dealer like Morgan Stanley lends 70 or 80% of the money against the bond as collateral, the repo desk creates that money, and the bank's balance sheet expands. A balance sheet that was 100 assets and 100 liabilities becomes 200 and 200, which is the textbook definition of monetary expansion. As he put it:
"Where did the money come from for new bitcoin demand? It came from thin air. It came from nowhere. And that's credit. That's balance sheet expansion. And that is what I believe drives bitcoin going forward, not some grand rotation."
The detail that genuinely surprised him is who started it. The convertible demand came from the bond shops themselves, credit managers who liked the volatility in MicroStrategy's stock and chased the returns their competitors earned on the early deals, calling dealers and asking for more issuance. It wasn't Bitcoiners selling Wall Street on a strategy; it was Wall Street building the strategy and pulling Bitcoin in. That's what led him to a rare admission for someone who called $500,000 Bitcoin back in Layered Money: he hadn't been bullish enough, because he'd missed a mechanism inside his own industry.
This is where the conversation connects directly to the dollar system itself. Bhatia expects a US strategic Bitcoin reserve to trigger others, with countries across the Middle East, Asia, Eastern Europe, and Latin America issuing sovereign bonds in part to build their own Bitcoin reserves. And nothing, he notes, gets repoed more easily than a sovereign bond. The crucial part is where those bonds live. Emerging-market and supranational sovereign debt, the World Bank, the European Investment Bank, Indonesia, Saudi Arabia, is overwhelmingly issued in the London eurodollar market, out of the same desks, financed by eurodollar repo that, in his words, "we can't even measure." That offshore funding market is the reason LIBOR existed in the first place, the L standing for London, before the system moved to SOFR. He walks through a concrete scenario: a macro fund buys a Saudi sovereign bond, pledges it for 70% cash in the repo market, and uses that cash to buy Bitcoin, a sovereign-bond-plus-Bitcoin overlay where the collateral is attractive precisely because it has Bitcoin behind it. "There's so much money that can just be created now that bitcoin is in the bond market," he said, almost in disbelief that his two worlds had collided this way. For why that London funding market quietly sits underneath the entire dollar system, see The Petrodollar, Explained.
Bhatia and I spent the back half pushing on the obvious objection, the one Jason Calacanis and much of FinTwit keep making: that MicroStrategy is dangerously levered and bound to blow up. The myopic version of that take misses that much of the company's debt has already converted to equity, and that a rising Bitcoin price de-levers the balance sheet rather than the reverse. More importantly, it treats any single demand source as the whole picture, when the real story is how many there now are, corporate treasuries, sovereign reserves, and Bitcoin creeping into private credit as collateral against commercial real estate. Sixteen years in, Bitcoin is a brand name that has been declared dead and recovered too many times to bet against casually. None of which means the ride gets smooth. Bhatia was careful to keep his own enthusiasm on a leash, and the caveat is the honest center of the episode: flow drives price until something, a rate hike or a liquidity contraction, makes the flow stop, and then it reverses and the price falls. The corporate-Bitcoin-bond market has never run through a real bear market, and Bitcoin, as he put it, is always trying to make a fool of you. The bullishness is hard to contain, but the discipline is to stay humble and avoid too many predictions.
