Written on April 15, 2025, in Singapore

Trump’s tariff policy has triggered turbulence and deep unease across global markets. On April 8, the VIX spiked to 52, yet clearly, that alone cannot resolve the complex, overlapping contradictions of this phase. Fiscal and monetary policies now seem capable of offering little more than short-term emotional reassurance. Amid "the Triple-Kill of Bonds, Equities, and Currencies", asset allocation has reached a deadlock under widespread fear. What should one hold now? This has become the core question on everyone’s mind in 25Q2.

When will Bitcoin rebound and rise again? That was by far the most frequently asked question during the first two weeks of April, as I attended the Web3 Festival in Hong Kong. During many panels and meetings, people repeatedly raised the same concern — how Trump’s tariff policy might reshape the crypto market and influence the price trajectory of Bitcoin. To be honest, it’s not an easy question to answer. That’s precisely why I’ve written this article — to offer some reference points and perspective.

tl;dr

1.The Triple-Kill of Bonds, Equities, and Currencies, and the Breakdown of the Merrill Clock

2.The Thucydides Trap and the Final Phases of Five Kondratiev Cycles in History

3.Greenspan’s Prophecy and the Role of Crypto at the Crossover Point of Kondratiev Cycles

4.What the Real Thucydides Trap Looks Like This Time

5.The Reversal of Bitcoin’s Correlation with Global Chaos and the Shift in Cognitive Inertia

6.The Fundamental Reasons Behind Crypto’s Second Growth Curve

1. The Triple-Kill of Bonds, Equities, and Currencies, and the Breakdown of the Merrill Clock

Why Did Trump Resort to an Extreme Tariff Policy? In simple terms, it looks like a classic MAGA play —aimed at reducing import dependency, boosting domestic employment, and stirring political sentiment. However, the public cannot survive on feel-good slogans. With inflation still running high and a staggering $1.3 trillion fiscal deficit, the conditions are far from fertile for a widespread "Buy American" revival. Real economic pressures are mounting and irreconcilable.

In an environment where both fiscal and monetary tools have lost their effectiveness, tariffs have become a last-resort move —a desperate option when no other cards are left to play. As Warren Buffett noted in a recent interview, “They (tariffs)’re an act of war to some degree.” While many of Buffett’s philosophies may no longer align with the paradigms of the next era, his experience-based judgment here is spot-on. The world now stands at a crossover point between two Kondratiev cycles. The postwar peace and credit frameworks are unravelling, and a new mechanism is already taking shape in this era of disorder.

Apart from the persistently high VIX index, the simultaneous decline of bonds, equities, and currencies is another unmistakable signal. At this year’s Web3 Festival in Hong Kong, I had the pleasure of discussing this “the Triple-Kill of Bonds, Equities, and Currencies” phenomenon in depth with Dr. Yi —especially its historical parallels in 1929 and 1971. These two turning points bear strong similarities to 2025 in terms of macro indicators and geopolitical climate.

Whether we’re heading toward a Great Depression + regional conflict scenario, a Cold War-style standoff, or an entirely new and independent script really depends (or more precisely, is reflected) in the performance of safe-haven assets —especially gold. As the saying goes “Hoarding Gold in Troubled Times.” This speaks directly to what makes gold distinct at these Kondratiev crossover points. Importantly, gold’s role here fundamentally differs from its typical "commodity" function in the overheated phase of the Merrill Clock. Its value now is not cyclical —but existential.

According to the traditional logic of the Merrill Clock, the shift from stagflation to recession typically transitions from “cash is king” to “bonds are king,” with investors awaiting the next recovery phase —where equities dominate once again. However, this is clearly not the current reality. The external macro environment does not support a natural transition into recovery. The Merrill Clock has stalled. In this context, gold repeatedly breaking all-time highs suggests that it has decoupled from the clock’s conventional trajectory. This deviation becomes even more apparent when compared to other major commodities: oil, silver, copper, soybeans, rubber, cotton, and rebar have mostly remained flat or only slightly above pre-COVID levels—far underperforming gold.

The breakdown of the Merrill Clock implies that both macroeconomic policy and market behavior are diverging from regular norms. Trump's rollout of extreme tariff policies appears, from a macro perspective, to be a passive reaction —an inevitability dictated by larger historical cycles.

A few more additional points are worth emphasizing:

①The breakdown of the Merrill Clock applies specifically at the crossover point between Kondratiev cycles, where the traditional economic conditions for its rotation are no longer valid. In more stable environments, its logic still holds.

②In such crossover periods, gold is not the only hedge asset. The recent global flow of capital toward quantitative funds and CTA strategies is no coincidence. Whether Bitcoin can seize this moment to prove itself as "digital gold" —by decoupling from its positive correlation with other financial assets —remains to be seen.

③Historically, the Merrill Clock doesn’t always break at the same stage of its cycle during Kondratiev transitions. The exact phase at which it stalls isn’t critical in a macro sense. But for fund managers and family offices still operating under legacy allocation assumptions, this should be a wake-up call to urgently reevaluate strategies.

2. The Thucydides Trap and the Final Phases of Five Kondratiev Cycles in History

Back in 2020, I summarized a chart to illustrate the industrial transitions and geopolitical shifts across the five historical Kondratiev cycles. But given how few people have personally experienced the intersection of two K-waves, it’s only now —when we are directly impacted by today’s economic and policy shocks— that those patterns truly come to life.

Historically, the crossover points of Kondratiev cycles have often coincided with the intensification of a Thucydides Trap—or tensions with a perceived Thucydides-style adversary. This time is no exception. However, the conflict has now surfaced between China and the United States—two nations whose historical and civilizational trajectories differ significantly. Trump’s tariff policy escalating at this particular juncture is not a coincidence, but rather an outcome that aligns with historical precedent.

The table below presents a comparative overview of key indicators at the end of each of the past five Kondratiev cycles:

(Note: Thucydides Trap pairings follow the sequence of Ruling Power vs. Rising Power.)

Once we extend the time horizon, the breakdown of the Merrill Clock and traditional economic policies becomes much easier to understand. The forces in play at a Kondratiev turning point are far more disruptive than the cyclical patterns captured by the Merrill Clock. As such, the crossover between K-waves effectively shatters conventional economic frameworks and ushers in an era of disorder.

A simple comparative glance makes our current position —and the challenges of the coming decade— strikingly clear. Beyond the parallels with past paradigms, what now demands deeper reflection are a few transformative questions:

①Will the new technological paradigm of digitalization and AI fundamentally reshape global production structures and governance systems?

②Are the U.S. and China truly the real contenders in today’s Thucydides Trap?

③What role does Bitcoin—and crypto more broadly—play in the context of these two systemic shifts?

3.Greenspan’s Prophecy and the Role of Crypto at the Crossover Point of Kondratiev Cycles

Much like the tariff policies seen at past Kondratiev turning points, Trump’s latest tariff measures may trigger a significant butterfly effect. Whether it stems from unresolved domestic economic challenges or from the mishandling of U.S.–China relations, any misstep —no matter how slight— could catalyze the outbreak of a disorderly era.

However, what’s at risk this time may go beyond the breakdown of the Merrill Clock typically observed at K-wave transitions. From a broader historical perspective, the emerging paradigm shift driven by digitalization and artificial intelligence is beginning to restructure the foundational elements of production and labor that have defined the industrial era for over two centuries. As a result, the Federal Reserve’s conventional monetary and fiscal policy tools —long used to manage the U.S. economy and stabilize global trade— may now face their greatest test: not just diminished effectiveness, but a deep structural challenge calling for transformation.

Alan Greenspan, in his 2013 reflective work <The Map and the Territory: Risk, Human Nature, and the Future of Forecasting>, noted: “We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints.”

In fact, many observers by now either have recognized or at least have sensed that the world is undergoing “deeply rooted structural constraints”. The global order and economic policy tools inherited from the post-industrial revolution era are increasingly misaligned with the demands of a world reshaped by rapid advances in digitalization and artificial intelligence. Since the rapid emergence of the digital and AI era, production tools have been evolving at an exponential pace. Combined with the disruptive arrival of Bitcoin in 2009 —which catalyzed the development of the Crypto Market and Degen communities across four cycles over 16 years— the accumulated momentum in productivity and production relationships is poised to unleash a qualitative shift at this fragile Kondratiev crossover point.

It's hard to say that Crypto and Blockchain-based Protocol Management will imminently replace the governance frameworks from the previous paradigm. However, it is undeniable that we are entering a non-reversible trajectory. Over the coming decades, the world is likely to operate under a dual-governance structure: on one side, the rise of crypto-native systems gradually taking over functions in global economics, finance, settlement, and even elements of social governance; on the other, sovereign nation-states maintaining their traditional social, economic, monetary, and fiscal governance by their existing cultural norms and vested interests. This duality also echoes the “primary contradiction of the global order” previously outlined in the article <The Dramatic Shift Following Trump’s Election Victory>.

In conclusion, Crypto's significance at this crossover point is monumental —it is not just an asset class or speculative cycle, but a catalyst poised to reshape the global economic and societal architecture at every level.

4.What the Real Thucydides Trap Looks Like This Time

I never believe that the Thucydides Trap in this phase lies between the United States and China. This is not to suggest that the economic scale of the U.S. and China does not constitute competition, nor to mean —like Huntington said in <The Clash of Civilizations>— that future power confrontations will unfold primarily between the West and the Islamic world. This time paradigm shift clearly transcends national boundaries and ethnic lines.

As early as 2014, a well-known Korean investor who backed Kakao once told me he believed that major global cities are more alike than different, and that the shared consensus among them has already surpassed that within many domestic urban-rural divides. In recent years, the emerging consensus among Digital Nomads and Degens further proves his point.

When examining historical patterns like the Thucydides Trap, it is essential not only to compare similarities between past paradigms but also to view them through the lens of technological and productive change to assess their relevance. Particularly at this crossroads —where "deeply rooted structural constraints" are being shattered— the divergence between American and Chinese governance styles is, in many respects, less pronounced than the essential divide between TradFi and DeFi, less significant than the difference between civil law and crypto protocol frameworks, and far less substantial than the ideological and cultural rift between conservatives and Degens.

As I noted in a previous article: “Most nations and interest groups across the globe still operate within a semi-feudal, semi-centralized state-capitalist environment. The current primary contradiction is driving a transition toward a hybrid system of semi-centralized state-capitalist and semi-decentralized digital information governance.” The current Kondratiev crossover point and the transformational momentum accumulated from structural tensions clearly indicate a trajectory toward this trend.

Looking back at the changes following the last five crossover points —chaos and reconfiguration, the surge of safe-haven assets, and the rapid development of next-generation production technologies— these were inevitable trends. What distinguishes this moment is that although the accumulated energy is stronger and more global, the direction of change this time is toward decentralization and system abstraction. In response to the question posed in the 1st paragraph, I believe this time we are more likely facing an entirely new and independent script. The level of global disorder will be high, but the targets of conflict will not be sharply defined.

5.The Reversal of Bitcoin’s Correlation with Global Chaos and the Shift in Cognitive Inertia

Against this backdrop, Bitcoin appears fully prepared to inherit the title of “digital gold.” However, history has never been a straight line. As of 25Q2, despite rising global disorder and fear, Bitcoin still lags behind gold in its function as a safe-haven asset. When chaos intensifies, Bitcoin continues to exhibit price behavior similar to traditional risk assets —bonds, stocks, and currencies— displaying a degree of inverse correlation with rising disorder.

We won’t delve too deeply here into the exact definition of "chaotic index", but several indicators can serve as important proxies: the VIX is a key factor, alongside the MOVE Index, implied volatility across asset classes, the Libor-OIS spread, gold volatility, central bank rate divergence (especially from the FED), the proportion of countries with negative interest rates, war risk indices, and levels of global trade fragmentation.

This persistent inverse correlation between Bitcoin and rising systemic chaos is largely dictated by holder psychology. It suggests that at least half—or possibly more—of Bitcoin holders continue to view it as a vehicle for capital appreciation or even as a speculative gamble. (The reason I say "possibly more than half" is because a significant share of Bitcoin is either locked through long-term holding or inaccessible due to lost private keys. There’s also a group of passive holders indifferent to price swings —none of whom contribute rationally to positive correlation during crises.) Meanwhile, the subset of speculative holders tends to exhibit a high turnover rate, further amplifying volatility.

Nevertheless, over the past six months, Bitcoin has increasingly distinguished itself from all other altcoins. Although Bitcoin has not exhibited a negative correlation with the broader altcoin market, its resilience across various market conditions has become more and more apparent —particularly in the face of escalating global chaos since the end of 2024. This signals a subtle but important shift: Bitcoin’s inverse correlation with systemic disorder is weakening, while its positive correlation is quietly strengthening.

Since the beginning of his second term, Trump has signed over 100 executive orders, many of which have relaxed restrictions on the crypto industry. His latest tariff policy acts as another accelerant at this Kondratiev crossover point, accelerating the clash between the old and new cycles. These macro-level developments will likely facilitate the reversal in Bitcoin’s correlation with chaos.

By mid-April 2025, the SEC had officially dropped lawsuits against several major crypto projects and entities, including Uniswap, Gemini, OpenSea, Kraken, Consensys, Cumberland, Coinbase, and Ripple. Furthermore, the FDIC and OCC significantly revised their crypto oversight frameworks, removing the requirement for banks to seek prior approval or report participation in crypto-related activities. Yet despite these major tailwinds, none of this has been fully absorbed by the public amidst the prevailing fear and uncertainty. In fact, most of these favorable developments remain unpriced in within a $2.6 trillion market (still not to mention the rapidly advancing RWA and PayFi sectors, which will be discussed later).

At this historical edge —perhaps the final innings of a broken paradigm— we now face two essential questions:

①Before Bitcoin achieves a clear positive correlation with global disorder, will there be another emotion-driven downturn?

②How long will it take for Bitcoin to be widely recognized as a safe-haven asset, similar to gold, with a strong positive correlation to rising chaos?

A turning point like this typically requires a collective shift in market and public perception, and such cognitive transformations often take considerable time —time we are unlikely to be afforded in the current turbulent crossover phase. Then again, Bitcoin has always been a contrarian force, challenging consensus and educating the market through shocks. It would not be surprising to see the emergence of unusual or extreme market behavior in the near future —driven not by logic, but by historical necessity.

Similar to the Merrill Clock, Bitcoin has historically followed a four-year bull-bear cycle driven by its halving mechanism, which has shaped much of the sentiment and asset allocation preferences within the crypto market. This pattern mirrors traditional macro cycles —but at 2.5 times the speed. However, after 16 years and four full cycles, 2025 has introduced anomalies that have led many to conclude we are in a "bull in name, bear in essence" phase. Some attribute this breakdown in strategy to ETF inflows or waning meme confidence, but in essence, I believe these irregularities stem from the disruptive energy at the Kondratiev crossover point —a global wave of systemic chaos that is now interfering with previously established crypto dynamics.

The past four Bitcoin cycles conditioned investors to anticipate predictable behavior across the crypto market. This very expectation helped Bitcoin and crypto assets gain recognition as strategic reserves among sovereign entities and institutional allocators. Perhaps, the disruption of that rhythm at this very Kondratiev crossover point may be the just ideal catalyst for Bitcoin’s transformation into digital gold.

In summary, 2025 stands as a historically volatile Kondratiev cycle crossover point. While we may face a short-term deviation from the expected four-year rhythm, a new pattern will soon emerge —one where Bitcoin’s behavior aligns positively with rising global disorder. This transformation will, in turn, ignite the next major wave of growth in the crypto market, ushering in what we call the second growth curve of crypto.

6.The Fundamental Reasons Behind Crypto’s Second Growth Curve

At the Hong Kong Web3 Festival in early April 2025, the RWA topic dominated the spotlight, surpassing all others in popularity and effectively dispelling the skepticism that some native Degens carried over from the previous cycle.

The pursuit of Real Yield and sustainable growth has gradually become a new consensus in the Crypto Market this year. History often advances under pressure —after the frenzy of Memes and BTCFi narratives throughout 2024, it has become increasingly difficult to gain trust or traction through storytelling and narrative preaching alone, the hallmark logic of the first growth curve.

In my earlier article <The Second Growth Curve of Crypto>, I discussed the rise of RWA and PayFi and their initial drivers. With the Kondratiev cycle crossover context described in this piece, it becomes clear that the deeper reason behind this trend is the irreversible structural need to establish new paradigms under growing global uncertainty and transition.

At this stage, many are understandably concerned with one question: Will RWA and PayFi fade like past narratives, never to return? The answer is clear—unlike speculative storytelling and hollow staking models, initiatives rooted in long-term structural reform will continue to accrue value over time.

As of 25Q1, a wave of real-world PayFi use cases and RWAFi investment funds has begun to emerge rapidly. New-generation projects, protocols, and chains like CICADA.Finance and Plume are accelerating at pace, bringing systemic changes to the market in 2025 and laying a strong foundation for the sustained rise of Crypto's Second Growth Curve.

Trump’s tariff policy was merely a butterfly effect, but it triggered a Kondratiev crossover point that is set to unlock a historic-scale opportunity. The anticipated reversal and transformation of Bitcoin’s correlation with global instability will become a key driver behind the Second Growth Curve —energizing growth across RWA, PayFi, and the broader crypto sector. This marks the first stage of the new Kondratiev cycle, in which Crypto and Blockchain Protocol Management will begin to penetrate the core structures of global economics, finance, trade, settlement, and governance.

Author: Gary Yang

Date: April 14, 2025

X: https://x.com/gary_yangge

E: gary_yangge@hotmail.com