S&P valuations could hit impossible levels like Lebanon's 62x ratio. The Fed just revealed hedge funds hold $1.8 trillion in hidden Treasury leverage, not $400 billion.
While many investors worry about the S&P 500's current price-to-sales ratio of 3.3 times looking historically overvalued, I'm predicting we could see valuations reach levels that seem impossible by today's standards. During Lebanon's currency collapse, their stock market reached a price-to-sales ratio of 62 times. This isn't a prediction that the S&P will hit those exact levels, but it demonstrates how far equity valuations can stretch during periods of currency debasement.
"It's not to say that the equities can't go up in dollar terms," Robert noted, "but what you really need to start doing is start changing the denominator." When you measure stocks in Bitcoin terms rather than dollars, the picture looks dramatically different. The S&P has already declined roughly 95-99% in Bitcoin terms since 2016 when modern populism began taking hold in America.
This matters because we're entering what appears to be another populist era, similar to 1965-1982 when the S&P went sideways in dollar terms but lost 90% of its value in gold terms. The combination of increasing debasement, yield curve control or QE to manage the conflict with bond markets, and political polarization creates an environment where nominal stock prices can rise significantly even as real purchasing power erodes. Gold's recent parabolic run already hints at this dynamic, and Bitcoin's perfectly inelastic supply makes it the superior asset for this environment.
A recent Federal Reserve report just revealed what may be the most significant Treasury market discovery in years. The Cayman Islands, previously reported to hold around $400 billion in US government debt, actually hold $1.8 trillion. This makes them the largest foreign holder of American debt by far, surpassing Japan's $1.1 trillion, the UK's $900 billion, and China's $700 billion.
This massive undercount of $1.4 trillion stems from the basis trade, a popular hedge fund strategy where firms short Treasury futures contracts while simultaneously buying the underlying cash Treasuries. As Robert, a macro analyst and former Bitcoin miner who runs the Infranomics YouTube channel, explained during our conversation, "The basis trade is financed in the repo market, which makes SOFR and what's going on there pretty important." The trade exploits tiny pricing differences between futures contracts and actual Treasuries, but hedge funds lever it up 50 to 100 times to make it worthwhile. This extreme leverage has already caused market disruptions in 2020 and during April's "Liberation Day" volatility.
The timing of this revelation is particularly notable given the recent SOFR spike to 0.19%, the highest level since 2020. With this much hidden leverage in the system, concentrated in what was previously considered "pristine collateral," the implications for Treasury market stability are profound. The Brookings Institute released a paper in June warning about these exact risks after the April basis trade blowout.
The collision between solar energy and Bitcoin mining is inevitable, and I'm seeing the technological pieces falling into place faster than most people realize. As Kent, CEO and Co-Founder of Sazmining, explained, "The cost curves for solar have come down faster than any other industry or energy source." The missing piece has been batteries, but as battery costs continue declining, the three-legged stool of solar, batteries, and Bitcoin mining will create something transformative.
Solar panels are unique because "it's the only way we can make electricity without moving anything," which gives them incredible longevity. China is already installing solar at rates exceeding any other energy source, and the decentralized nature of solar mirrors Bitcoin mining perfectly. Both are distributed, disruptive to legacy grids, largely manufactured in China, and have profits constrained by energy networks.
Kent's background in the solar industry from 2005-2014 gives him a unique perspective on this convergence. He led sales and business development for a publicly-traded solar energy company, managing a team of over 100 people with nine-figure sales targets. Now, as CEO and Co-Founder of Sazmining, he's positioning at the intersection of these trends. The real opportunity isn't massive solar farms but utilizing existing rooftop real estate. When solar becomes cheap and ubiquitous enough, which current trends suggest is a matter of years rather than decades, the combination with Bitcoin mining will create new economic incentives for distributed energy production and consumption.
These predictions point to a common theme: the financial system as we know it is breaking down, and new models are emerging. Whether it's hidden leverage in Treasury markets, currency debasement driving stocks to absurd nominal valuations, or the technological convergence of solar and Bitcoin mining, the next few years will separate those who adapt from those who cling to the old paradigm.
Stay humble and stack sats.
Ten31, the largest bitcoin-focused investor, has deployed $150M across 30+ companies through three funds. I am a Managing Partner at Ten31 and am very proud of the work we are doing. Learn more at ten31.vc/invest.
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