TheAlphaLetters

Rx turned PE/VC.

Professional footnote reader.

[TheAlphaLetters @TheAlphaLetters]

Right, and the same math runs to a darker endpoint than one bad week. Falling harder in every drawdown is survivable if you recover, but most don't. More than half the tokens launched since 2021 are already dead, not down, gone. The weekly underperformance is just the visible part of a structure where the base rate is zero.

[TheAlphaLetters @TheAlphaLetters]

Skeptic here, but the steelman exists, it's a bet on long-run monetary debasement. Fixed 21M cap vs a system that keeps growing the money supply. What it isn't though is a short-term inflation hedge or a safe haven, the drawdowns are brutal and it trades like a risk asset in stress. So the case is 10+ year debasement insurance you can stomach, or nothing

[TheAlphaLetters @TheAlphaLetters]

The catch is the same one that breaks every quant signal in that a benchmark edge is only an edge until it's priced in. Public evals get arbitraged away fast and the alpha isn't benchmarking deeply, it's benchmarking what the market hasn't priced yet, capability overhang the consensus can't see, or a trajectory read that's not obvious. The moment the eval is legible to everyone, the edge decays

[TheAlphaLetters @TheAlphaLetters]

The general version of this very underrated, a government stake is an asset domestically and a liability abroad. Sovereign and enterprise buyers hesitate to put critical infrastructure in a vendor their rival government partly owns, see Huawei. So state backing can shrink the addressable market even as it shores up the balance sheet. Whoever takes the money is making that trade.

[TheAlphaLetters @TheAlphaLetters]

The tension is that capital getting absorbed at historic scale is exactly what squeezes structure, not Bitcoin's. Strategy runs on continuous capital raising, equity at a premium and ~$900M a year in preferred dividends to service. A market where capital is scarce and expensive is the one where that machine gets harder to run. He is describing his own headwind and calling it a tailwind.

[TheAlphaLetters @TheAlphaLetters]

bitcoin:native is sold on three promises: digital gold, a hedge against inflation, and a refuge when markets break. Its own price record since 2020 contradicts all three. In every episode of real stress it has moved with risk assets and fallen hardest exactly when a haven should hold.

Start with diversification, the original case. It rests on Bitcoin having low correlation with stocks. Through 2017 to 2019 there was something to that: the IMF found Bitcoin's correlation with the S&P 500 sat close to zero.

That broke after the second quarter of 2020. The IMF found crypto's correlation with equities rose sharply, and turned higher than its correlation with gold, bonds, or major currencies. One 2025 academic dataset put Bitcoin's correlation with the Nasdaq near 0.89 in 2022. That is not a gold substitute. It is the same risk everyone already owns, with more leverage.

The inflation hedge met its clean test in 2022. US consumer prices rose 9.1% in the year to June 2022, the highest since 1981. If Bitcoin hedged inflation, that was the moment. Instead it fell more than 70% from its November 2021 peak, while gold held roughly flat (Smales, 2024).

The safe haven claim is the easiest to check, because havens are defined by one behavior: holding when risk assets fall. In the COVID crash of March 2020, Bitcoin lost roughly half its value within two days, alongside equities. A peer-reviewed study found it falls in response to financial-uncertainty shocks, the opposite of gold.

Set the crises aside and look at the baseline. A store of value is judged on holding worth over time. Bitcoin's peak-to-trough drawdown by cycle, on Glassnode data: roughly −93%, then −85%, then −84%, then −77%. Since 2020 its volatility has run about three times the S&P 500 and four times gold.

Four declines of 77% or worse in just over a decade is the profile of a speculative asset, not a store of value. Volatility four times gold's is not gold's job performed by another route. It is a different asset class.

One version of the bull case survives, and honesty requires conceding it. Over multi-year horizons, some peer-reviewed work finds Bitcoin does hedge slow monetary debasement, and it recovered from the 2022 lows to new highs. That argument stands on its own terms.

What it cannot do is rescue the marketing. A hedge that fails in the actual inflation spike, halves in the panic, and draws down 77% on schedule is not a safe haven or digital gold. It is a reason some investors may choose to hold Bitcoin, not evidence that it behaves like gold.

Bitcoin is best read as a high-volatility risk asset, tied to equities and most correlated with them at the moment correlation hurts most. Coherent to own, at a size that matches that risk. The error is owning it as the safe corner of the portfolio, it concentrates the risk you already hold rather than diversifying it.

[TheAlphaLetters @TheAlphaLetters]

Genuine question here on the power law, is there out-of-sample evidence the multiplier predicts forward returns, or does it just describe past price? 'Cheap vs the model' is circular when the model is built from the same price history, and the growth slope it extrapolates should be the first thing to decay as BTC gets bigger.

[TheAlphaLetters @TheAlphaLetters]

With you on the substance. BTC was sold as money and an inflation hedge, and it's behaved like a high-beta risk asset, big drawdowns, sells off when markets get scared, correlated with the Nasdaq. Whatever it is, it isn't the hedge it claimed to be. That case stands on its own, doesn't even need a price target.

[TheAlphaLetters @TheAlphaLetters]

https://t.co/b25yD0dDW5

[TheAlphaLetters @TheAlphaLetters]

Funny part is your own framework here warns about leverage, custodial concentration, and institutional dependence in the Fundamentalist section. Then your company is the textbook case of all three. You describe the disease here and are the patient. Bitcoin was built to cut out the middleman. Your model adds a company, a debt pile, and a custodian between you and your coins.

[TheAlphaLetters @TheAlphaLetters]

Best we could probably do is triangulate. Nvidia discloses customer concentration in the 10-K (if I recall correctly a couple of unnamed customers run mid-teens % of revenue each) and its strategic investments are disclosed too. So you can bound the suspicious perimeter, but you can't isolate the exact dollar that left as Nvidia capital and came back as a GPU sale, money's fungible once it's out. So you're right it's partly a black box. The opacity itself is the concern, not that we can prove it's mostly circular. I can probably dig into some equity research sometime soon and make a few visuals on this

[TheAlphaLetters @TheAlphaLetters]

Real concern, worth sizing though. The circular deals exist, Nvidia's stakes in OpenAI, CoreWeave and others, and some of that does cycle back into GPU buys. But the bulk of revenue is hyperscalers spending their own operating cash flow, not Nvidia's money. So it's a quality of revenue question on a slice, not the whole engine. The thing to watch I think is what share is circular and whether it's growing

[TheAlphaLetters @TheAlphaLetters]

@pmarca The most expensive words in VC: ‘We’ll keep an eye on it

[TheAlphaLetters @TheAlphaLetters]

@nonequitypartnr “Private equity consortium acquires the last independent hospital, water utility, and youth soccer league in a single roll-up”

[TheAlphaLetters @TheAlphaLetters]

@BitcoinMagazine This was truly a once in a blue moon opportunity to go short.

[TheAlphaLetters @TheAlphaLetters]

@Bouje99 @zerohedge 100%. Spending this much only looks smart in hindsight, when you can see whether the revenue showed up. Right now it’s a bet

[TheAlphaLetters @TheAlphaLetters]

Who actually bears the $8.9B here? If it's equity funded with no debt covenants, isn't this just a concentrated shareholder bet down big, rather than a solvency risk like the levered treasuries? Curious if you see a forcing mechanism I don't, especially now that they're filing preferred.

[TheAlphaLetters @TheAlphaLetters]

This is nominal dollars across ~30 years, so 2026 towers over 1998 mostly because the market went from $13T to $69T, as a share of cap, ~$700B is about 1%. The bigger piece is expiring lockups, which means shares become eligible to sell, not that they're sold, insiders don't all dump on the unlock. And it's gross supply: buybacks ran ~$1T last year and retire stock, dwarfing the ~$220B of actual IPO proceeds. Net equity supply is often negative. All real, just not the flood the chart implies.

[TheAlphaLetters @TheAlphaLetters]

Misleading here. Citi's Panic/Euphoria sentiment gauge is not a crisis signal. It measures investor optimism, the opposite of 2008, which was a solvency collapse. The gauge also hit euphoria in 2024 and 2025 with no crash, and Citi itself says don't use it to time the market. Meanwhile their house view for 2026 is a bull market near 7,700. Frothy sentiment is a real caution, just not the one the 2008 bailout image is selling.