What happened today? 21 Jan 26'
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[Audio version in podcast format]
Today was not just another day; it was a rollercoaster. Since Trump arrived in Davos, the markets have reacted with visible volatility. His speech effectively split the day into two distinct phases. Initially, he reinforced the urgent national security need for the US to acquire Greenland and questioned how NATO has treated the US despite American defense efforts. However, the tone shifted significantly in the second half. Trump offered relief, clarifying that “he is not crazy” and has no intention of using force to acquire Greenland. Instead, he expressed a desire for the UK and Europe to thrive, signaling a US commitment to stronger cooperation and a robust NATO. Senator Marco Rubio later confirmed this stance, emphasizing that the US requires strong European allies.
The market’s day began on a positive Trump speech started pre-opening, with Bitcoin climbing from $88k to $90.5k, likely anticipating a constructive address. This sentiment reversed rapidly when Lars Rasmussen, the Foreign Minister of Denmark, stated they were not negotiating to compromise on fundamental principles, effectively rejecting the demand to takeover Greenland. Consequently, Bitcoin retraced to $87.5k. The narrative flipped again following a meeting between President Trump and NATO Secretary General Mark Rutte. Trump announced that they had formed a framework for a future deal regarding Greenland and the wider Arctic region. Crucially, based on this progress, the US removed tariffs scheduled for February 1st. Markets immediately ripped, sending Bitcoin back to $90.5k. We mentioned few days the tariff playbook, and since yesterday is the relief period.
Gold and Silver traded inversely to Bitcoin throughout this volatility. As soon as the tariff removal was announced—signaling a stronger US-Europe alliance—precious metals dumped. The market is effectively pricing in that if geopolitical stability improves, the immediate necessity for Gold as a safe haven diminishes. Following the Trump-Rutte meeting, various political figures, including those from Sweden and Denmark, congratulated the move to back down from tariffs. Lars Rasmussen noted that “the day ends better than it started; positive that trump says he will end this trade war”. We are targeting the pullback from GOLD and SILVER on the market relief, I’m still expecting the continuation. The deal is not close, but at least a major risk of military force is gone.
We now have highlights regarding the potential structure of the Greenland agreement. The deal implies that Denmark may grant the US sovereignty over specific pockets of land for military bases, alongside involvement in mineral rights. This arrangement is reportedly for perpetuity, with no defined expiration. This aligns with the five core pillars of the Trump administration’s current focus: a booming US economy; the need for European reform regarding migration and energy; securing Greenland for national security; countering China; and passing market structure regulation for crypto.
Passing the market structure bill is a critical objective. David Sacks highlighted that both banks and crypto companies have strong incentives to get this deal done. The primary friction point remains stablecoin rewards. While these are permitted through the genius act, banks must find a way to navigate the legislation or risk stagnation. Simultaneously, crypto companies need these rewards to incentivize users but require regulatory clarity to move forward. The mutual pressure suggests this bill will likely pass sooner rather than later.
Hopefully, today’s events have calmed tensions between Europe and America. While communication has improved positively, friction remains. Christine Lagarde notably left a Davos VIP dinner after the US Commerce Secretary criticized European energy policies and economic competitiveness. This criticism appears valid, particularly given comments from German Chancellor Friedrich Merz, who admitted that the decision to “shutdown all (Germany) nuclear power plants was a huge mistake and has come at high cost to the economy. It was a serious strategic mistake to phase out nuclear energy… We are now undertaking the most expensive energy transition in the entire world.” Europe’s push toward green energy, specifically through inefficient investment in wind mills, has seemingly eroded its energy sustainability.
Beyond geopolitics, Jamie Dimon provided crucial insights. He raised concerns over the labor market’s lack of predictability but highlighting that “if he has to bet, he will bet on JPMorgan will have less employees in 5-years” and emphasized that AI will be a “parabolic” technology, fundamentally changing the landscape. He noted that banks are now competing not just against each other, but against agile fintech companies. Furthermore, Dimon warned that a credit capped policy would be an economic disaster. The primary victims would not be credit companies, but retailers, restaurants, travel companies, and schools.
I run some numbers to better understand what he said, credit cards account for approximately 35% of all payments, with 90% of consumer debt priced as high risk (meaning interest rates >10%). In terms of annual consumption, roughly 21% occurs through these high-interest channels. If President Trump backs a policy to cap rates at 10%, it implies the risk of supporting consumer credit no longer justifies the return. If banks comply by cutting off lending to high-risk borrowers, consumption could drop by that 21%, hurting the economy massively. It is likely Trump would then have to intervene, forcing banks to support credit bills rather than retreating from the market.
After less than 48h announced from NYSE tokenization platform, today ONDO launching 200+ tokenized stocks, ETFs, bonds, and commodities on solana via Jupiter with NYSE-backed liquidity. This is a massive update for crypto.