Bitcoin plunged on the aforenoted job report, erasing yesterday’s gain. (Disclosure: I remain short Bitcoin.) This is why shorting Bitcoin is the best hedge, as was originally my idea. Bitcoin has much more beta/sensitivity to the downside, whether it’s inflation due to too many jobs, or crisis due to deflation and job loss. Or bad news from Iran, China, tariffs, or any other reason.
No other asset, whether it’s gold or treasury bonds, hedges nearly as well as shorting Bitcoin does. This was all my idea. No one had been doing this. The usual hedges that get touted are treasury bonds or gold. These are less reliable.
I have long maintained that economics, finance, and human behavior are much more predictable than commonly assumed. Capital follows power, and power influences how capital is allocated–a feedback loop or vicious circle. Capital allocates itself along a gradient to maximize its return. This is true regardless of how powerful AI becomes–it’s an invariant quality. We see this with how Washington is centered around “big tech” and AI, or how those influence policy at the highest levels, in agreement with this thesis.
This makes investing easy by allocating one’s capital accordingly. Conversely one can hedge and generate greater risk-adjusted return by shorting neglected/powerless asset classes, such as Bitcoin, which was my idea in 2024-2025. I had correctly understood the interplay of power dynamics and capital to make what would later prove to be the optimal trade , that being buying semiconductor stocks and also shorting Bitcoin.
By buying an index fund/ETF (e.g., QQQ or SPY) and at the same time shorting Bitcoin. You’re betting on tech dominance, which is a real thing, and at the same time capital flowing out of an inflated asset which has no clout on Washington despite the media insisting it does. As I said, tech “captured” Washington and Trump, not crypto (most people got it reversed). Being well-versed in “power and economics dynamics”, I took the contrarian and correct position.
Overall, the mistake people make with stock picking or investing is they ask, “Which stocks are going up now?” They look for the best performing stocks or sectors, which proceed to underperform when sentiment suddenly changes. That was my mistake early on. The correct question is, “Who or what is in power, and contingent on that, which stocks or sectors will benefit?” Structural or institutional effects are more reliable than merely sentiment, which can change without warning.