Vikara August 2025 Update – From Fiat Fragility to Digital Opportunity
August 30, 2025 Vikara August 2025 Update – From Fiat Fragility to Digital Opportunity DOWNLOAD PDF REPORT We are living in incredible times. Seeing a central bank governor sacked for cause, increasingly questioning the integrity of US government statistics, or watching B2 bombers fly over the head of a sitting president of a foreign adversary on US soil, this past month was surreal. Some of these events are outputs of a failing fiat system. Political viewpoints get more extreme, grifting becomes commonplace, and ever greater risk is required to ensure as little worthless paper is held as possible. We remind ourselves of this every time the top calling chorus calling is loud. While valuations are high, the transition from a government investment cycle to a corporate led one will be positive for earnings. The economic slowdown seems more about labour and capital markets repositioning, than something structural. At least for now. The 2-year treasury is telling us that it sees growth slowing, but its orderly decline suggests there is no reason to panic (Chart 1). The question is how long the repositioning takes and how bold the now Republican stacked Federal Reserve decides to be during the transition. Chart 1 – 2-Year US Government Bond Yield (2000-2024) Source: Tradingview.com, Vikara Capital If the transition happens smoothly, which we believe it can, and the Federal Reserve doesn’t get coerced into stimulating too heavily, there is a lot to be optimistic about. Lower rates, moderating inflation, and a sense of stability is positive for digital asset prices. The biggest risk is Trump’s desire to run the economy hotter than what is needed. Another round of inflation is very likely if he does. While tariffs are deflationary in the short term, they are inflationary long term if demand continues to outpace supply. Let’s hope they can strike a balance. What is important from our side, and hopefully is resonates from the macro section below, is that the probability of a period of sustained global growth is much more likely in the next few years than a global recession (while many would argue, and even we feel strange saying). The frustration as a digital asset manager, is that the space continues to be dominated by financial nihilism from retail punters that are talking themselves into the next bear market without ever having had a real bull market. Four-year cycles don’t exist when the Fed is standing in the way. After allocating capital into the space for past few years, it is shocking to watch the negative sentiment permeate through the market despite Bitcoin being close to all-time highs, the macro backdrop turning in favour of risk assets like crypto, with ex-Bitcoin names are cheap relative to equities. While fundamental investors have underperformed the top 10 names, it feels like it could be turning. Macro We are changing our macro section to make it more focused. We will choose a handful of charts that describe our view of the macro economy as it remains the core driver of digital asset prices. For all of the doom and gloom in the market – “the bubble is over, valuations are too high, stocks are peaking” – we see a lot to be positive about. Trade deals are progressing, peace negotiations seem positive, and US Tariff revenues are partly offsetting a dire US fiscal path (Chart 2). Chart 2 – US tariff revenue from customs duties and certain excise taxes ($m) (2021-2025) Source: U. S Treasury Department, @Convertbond On top of that, 2Q25 was the best earnings seasons in 4+ years, with ~63% of the S&P 500 companies beating earnings expectations by at least 1 standard deviation. Excluding the post-pandemic recovery, this marks the best quarter in at least 25 years (Chart 3). Chart 3 – Frequency of earnings beats and misses (2000-2028) Source: Goldman Sachs Global Investment Research, @KobeissiLetter While August data revisions raised concerns around the integrity of US government labour statistics, it’s important to point out that most of the data across all sectors is seasonally adjusted by statisticians, meaning the data rarely speaks to what prices are actually doing. Annualized monthly inflation impulse normalized for much of this (Chart 4). Annualizing the latest month’s change in inflation shows the current inflation speed without looking at stale data from 12-month ago, showing a current impulse is 2.4%, which is below the multi-decade average of 2.9%. Chart 4 – Annualized Inflation Impulse (2021-2025) Source: @nsquaredvalue Slack in US labour markets will continue to drive an easing bias within the Fed, as US wage growth across all quartiles continues to fall (Chart 5). Trends across rental markets and consumer spending are also supportive of declines in inflation moving forward. Chart 5 – 12-month mocing average of median wage growth, by quartile (2018-2026) Source: Financial Times, @elerianm It is hard to fathom, but the data looks more like a bottom in the economic cycle than a top. Supporting this is the ratio of the Leading Economic Index relative to the Coincident Economic Index, which is at levels that have historically been consistent with the ends of recessions (Chart 6). Chart 6 – Conference Board US Leading Index Ten Economic Ind / Conference Board Coincident Composite of 4 (1960-2024) Source: Bloomberg Finance L.P, @KevRGordon Our view is also supported by easing financial conditions, which has historically taken 18+ months to flow into ISM data and the real economy (it looks like it may be starting to) (Chart 7). Chart 7 – Financial Conditions have been easing since 2023 (2000-2025) Source: @AndreasSteno As the US economy shifts from a public led, to a private led economic recovery, China seems to fuelling another credit cycle to turn around its economy (Chart 8). China’s credit impulse (defined as the rate of change in the flow of new credit as a percentage of GDP), is accelerating. According to Global Macro Investor, outside of Japan, credit impulses across the major economies are all positive. Historically, this has been a powerful leading indicator
Vikara July 2025 Update – You can only walk halfway into a forrest.
July 31, 2025 Vikara July 2025 Update – XXXXXXXX DOWNLOAD PDF REPORT This month, Ethereum became the 25th largest asset in the world, AAVE’s capital deposits surpassed the tenth largest US bank, and Helium surpassed 1.1 million daily users. Nobody cares. The Genius bill was also signed into law in the US. Stable coins are now legal; tokens will be next. It feels surreal to be immersed within an ecosystem that has an endless list of positive fundamental tailwinds and yet the worst investor sentiment of any market we have been in. We spoke to multiple industry friends this month and were shocked to learn here that the only people making consistent money are trade-fi bankers and VCs that are rinsing retail investors. It is crazy that these groups are selling assets at three times NAV that can be bought for zero premium. What is obvious from our vantage point is that all roads are leading to crypto, and while it is frustrating to watch the pre-regulation grifting, we are positive that more and more investors will have access to buy the same great tokens that Vikara has spent hours researching Outside of crypto, it seems notable to flag that 35% of US trade deals have been renegotiated, with price impacts able to be accurately forecast. The need to for the remaining trade holdouts to strike a deal is increasing and the noise around trade may be substantially reduced in the near term. The Federal Reserve is determined to remain restrictive. While economic data is worse today than it was as it cut 50bps ahead of Bidens re-election campaign, markets are left wondering if this is a politically motivated Fed. We don’t believe it is a left versus right issue, but more a US versus China one. US rates are an offensive weapon that are being used like any other military equipment. So as much as we like to talk about independence, rates will probably stay high until a trade deal with China is reached. This point is important in the context of the public arm wrestle between Trump and Powell. They both believe they are serving America’s best interests. Regardless, will be replaced in May 2026 and markets will soon hear from next Chair-to-be who will be signing a different tune. This is a backdrop duration assets have been waiting for, and crypto will be the first to respond. Chart 1 – Ethereum is a top 25 global asset with a $436.84B market cap Source: @stats_feed Macro The macroeconomic backdrop feels like ground hog day. Employment, consumption, savings, and delinquencies are rising while the Fed tells us everything is fine. Most indicators are screaming for rate cuts, while the Fed stares at the highest tariffs since the 1930s and stays on hold (Chart 2). Chart 2 – U.S Effective Tariff rate (1900-2025) Source: Blackrock Investment Institute, Census Bureau, Haver analytics The Fed has taken the view tariffs will bring inflation, with fourteen FOMC members seeing upside risks to inflation and unemployment forecasts while none projected downside risks (Chart 3). Chart 3 – FOMC members see upside risks to their inflation forecasts (2018-2025) Source: @KobeissiLetter The Fed’s fear about inflation isn’t supported by current data, with June PPI rolling despite 2Q having a seasonally upward bias for inflation (Chart 4). Chart 4 – US PPI Final Demand YoY / US PPI Final Demand Less Foods and Energy (2011-2025) Source: Bloomberg Finance L.P, @LizAnnSonders CPI is also well anchored, despite rebounding modestly from May levels. Core prices rose 0.23% in June (annualizing at 2.9%), which is significantly lower than where it was feared to be despite considerable demand being pulled forward by the fear of trade wars (Chart 5). Chart 5 – Consumer Price Index (2018-2025) Source: @NickTimiraos, Macrobond, U.S Bureau of Labor Statistics While many believe the declines in inflation are over, the new tenant rent index (which leads CPI rent and makes up ~30% of the Core CPI Inflation gauge), fell an unprecedented -9.3% YoY in Q2 2025. This should drive disinflation in shelter CPI into 2H25 (Chart 6). Chart 6 – New Tenant Rent Index vs CPI Rent (2010-2025) Source: @GlobalMktObserv While US 2Q GDP is soft, the annualized growth rate of 3% will be used by the Fed to justify that there is nothing to see here (despite 2Q being driven by net exports as importers front ran tariffs) (Chart 7). In the first half, the US grew at 1.5%, its slowest 1H growth rate since 2022. Chart 7 – Contributions to percent change in real GDP (2Q2025) Source: US Bureau of Economic Analysis While backward looking data is used to justify higher rates, real time data like the Richmond manufacturing survey is telling a different story. It shows employment remains weak and capital spending plans continue to fall (Chart 8). Chart 8 – Employment and Capital Spending Plans in Richmond Fed district (2011-2025) Source: Renaussance Macro Research, Macrobond The weakness in economic activity is being confirmed by softening unemployment data that increasingly points to a Federal Reserve that is behind the curve. ADP payrolls show a clear weakening in US labour markets (Chart 9). Chart 9 – ADP National Employment Repost SA Private Nonfarm Level Change (2021-2025) Source: Bloomberg, Finance L.P, @KathyJones Federal government job openings, one of the largest employers during the Biden administration, are now back below the lowest levels since 2020 (Chart 10). Chart 10 – Federal Government Jb Openings: Lowest since Covid (2004-2025) Source: @zerohedge US job postings on Indeed dropped to their lowest since February 2021. They are now near the pre-2020 levels and have been declining for over three years (Chart 11). Chart 11 – US Job Openings on Indeed (2021-2025) Source: Indeed, @GlobalMktObserv Challenger job cuts continue to trend well above any other year in the past 15 years with healthy economic growth (Chart 12). Chart 12 – Challenger Job Cuts (2009-2025) Source: @GlobalMktObserv A record number of Americans expect higher unemployment in the next 12 months (the
Vikara June 2025 Update – Markets Await the Pivot
June 30, 2025 Vikara June 2025 Update – Markets Await the Pivot DOWNLOAD PDF REPORT We have mixed feelings about this past month’s events. The optimist in us believes we are very close to peace, while the pessimist in us is wants to build a bunker and stock up on tinned food. Watching Isreal and the US dismantle Iran’s leadership and nuclear facilities is surreal. It sets a dangerous precedent for all nations engaging in war, while highlighting that modern warfare will not look very different versus the last large-scale war. No one, in any location, is safe. The silence from Middle Eastern leaders after US attacks spoke volumes. It is worth rewatching Trump’s speech at the Saudi-US Investment Forum from May, as his message hits harder today than it did at the time. Iran is the only country still fighting in the region, while its neighbours have moved on. The growing wealth in the region is going to accelerate regional security deals and US arms sales. Trump’s message was simple: endless diplomacy without action is over. The reverberation since the attacks has changed the balance of power at the negotiating table(s). NATO has announced increases in defence spending, China has signed a trade deal, and Germany is advocating for trade concessions. It is time to make a deal or live with the consequences. If trade deals are achieved, the path forward for global growth is much more positive. In the meantime, economic data continues to worsen, with China’s growth languishing while US data decelerates. As the PBOC prints money to support growth, the Fed has pivoted away from being data dependent towards politically motivated and diverging forecasts. The altcoin cycle will not begin until the Fed capitulates. Fortunately, we believe we are very close, with two Federal Reserve governors commenting that rates should be cut as early as July. Powell may be able to preach from the same hymnbook for another month, but incoming data will force change. Monetary loosening at a time of already untenable fiscal policy is a return to a backdrop we know well. No combination of unrealized capital gains tax, land tax, death tax, carbon tax, or war tax, will solve western governments addiction to debasing fiat currencies. Digital assets have historically provided substantial returns for investors during periods of loose fiscal and monetary policy, and while we have seen many false starts since inflation peaked in 2022, we are nearing a time when investors will seek duration while moving out on the risk curve. The turn in the macro is occurring amid terrible altcoin sentiment, after two years of relentless Bitcoin dominance. It isn’t for the faint of heart, this is where solid returns have been generated. Chart 1 – % of asset (ex stablecoins) outperforming Bitcoin over 90-day period (2019-2025) Source: LSEG Datastream, Global Macro Investor Macro There might be plenty to be positive about if the US can finalise its trade negotiations, with the only thing stopping lower rates being a stubborn Federal Reserve Chair that believes forecasts are better than actual data (Chart 2). Import inflation seems non-existent. Chart 2 – US import price indexes for selected categories (12-month % change) (2005-2025) Source: US bureau of Labor statistics We believe inflation will continue to moderate, with broad declines across US producer price inflation showing prices softening across nearly all sub-categories (Chart 3). Chart 3 – Share of PPI sub-categories with positive YoY inflation (2000-2024) Source: Haver Analytics, Goldman Sachs; @MikeZaccardi, @JeremyDSchwartz, @fundstrat Nonfarm payrolls have been revised down 12 out of the last 15 months (Chart 4), confirming labour markets are weakening faster than the estimated numbers that keep getting revised lower suggest. Chart 4 – Unemployment expectations versus non-farm payroll (2001-2025) Source: US Bureau of Labor Statistics, University of Michigan, Apollo Chief Economist, @GlobalMktObserv Labor market respondents who say jobs are plentiful less those who say they’re hard to get declined again in June to a new cycle low (and a level last seen in early 2017) (Chart 5). Chart 5 – Conference Board’s labor market differential (1970-2025) Source: Macrobond, Conference Board, @NickTimiraos In addition, 66% of US consumers expect an increase in unemployment over the next 12 months, the highest level since 2008 (Chart 6). Chart 6 – Unemployment expectations versus Risks of Personal Job Loss (1997-2025) Source: University of Michigan, @KobeissiLetter The US ISM composite index is below 50, meaning that there is very high likelihood that the US is already in a recession (Chart 7). Chart 7 – US ISM Composite Index (both services and manufacturing PMIs) (2000-2020) Source: Haver Analytics, Institute for Supply Management, Rosenberg Research, @EconguyRosie While the Conference Board Index of Leading Economic Indicators is down 38 of the past 41 months, which is a recession indicator (Chart 8). Chart 8 – Conference Board LEI Drawdown from ATH (1973-2025) Source: @nsquaredvalue While the US continues to weaken, China is going from bad to worse, with new and existing home price declines accelerating again, despite property prices falling since 2021 (Chart 9). Chart 9 – China Existing Home Prices MoM (2017-2025) Source: TheDailyShot.com China’s worsening credit data shows that the housing market is unlikely to get better any time soon, with outstanding loan growth decelerating to a new record low (Chart 10). Chart 10 – China Yuan Loans CNY YoY (2015-2025) Source: TheDailyShot.com While both China and the US should be easing, geopolitical decoupling has prevented China from easing ahead of the Fed as it needed to rebase its foreign reserves into gold (Chart 11). Chart 11 – Share in global reserves (2017-2025) Source: IMF, SG Cross Asset Research/Forex, @GlobalMktObserv This is not a new trend, despite it accelerating as tension have risen in recent years, with other central banks also increasing gold purchases (Chart 12). Chart 12 – Central Bank purchased of gold (declared versus estimated) (2010-2024) Source: World Gold Council, Metals focus, IMF, Bloomberg, @Barchart With central banks opting for gold, it is not surprising that the US dollar is on
Vikara May 2025 Update – Will Stablecoin Regulation Spark Mass Adoption?
May 30, 2025 Vikara May 2025 Update – Will Stablecoin Regulation Spark Mass Adoption? DOWNLOAD PDF REPORT The month of May saw rates, equities, and crypto move higher. This is a perplexing backdrop, given rate markets and rating agencies are concerned about US debt issuance, while equity markets dismissed any impact on earnings or multiples. Trump’s plan of burning down the post-World War II system is creating an increasingly bifurcated world. For decades, the US has relied on allies and trade partners to buy its treasuries and finance its debt, but this dynamic is rapidly changing. Digital assets are at the centre of what seems to be the continuation of an ever more volatile and polarized political leadership class. While most understand that Bitcoin unlocks stranded power, many miss that US dollar stablecoins unlock substantial demand for US treasuries. A stablecoin holder comes with zero demands on the US (unlike the demands of allies or trade partners). In addition, decentralized ownership and self-custody is a critical hedge many will eventually put in place to safeguard themselves from continued reckless government behaviour. Treasury Secretary Bessent estimates stablecoin demand could reach $2 trillion in the “near term”, which is why the US government is accelerating the GENIUS Act (to regulate stablecoins) and is pushing its largest banks to offer stablecoin services as a way to find new buyers for its treasuries. Chart 1 – Stablecoins may become one of the largest holders of US treasuries (May 2025) Source: Vikara Capital, Grok While these numbers seem enormous, companies like Visa, Mastercard, PayPal, and Meta are all discussing US stablecoin issuances to help monetize global userbases, which would essentially allow corporate America to accelerate treasury ownership by the end user. Which gets us to the ultimate sales pitch for Vikara. If Bitcoin is about to become a global reserve asset like many believe, and trillions of dollars are about to enter the stablecoin market, is it really that hard to believe the $600bn alts market captures some of this value along the way? Will privacy solutions gain share? What about security infrastructure? Decentralized media and communication? Fiat to crypto payments? Trading infrastructure? It shocks us that there is a reasonably high probability these solutions are needed in the short term and yet so few are paying attention. We continue to believe that the formation of a global digital capital market will drive substantial change in all markets, and early investors in its critical infrastructure should be rewarded. Macro May was a strange month, with Trump’s binary bet that he can reduce inflation while tearing down a deflationary globalized post-world war system entering stage 2. Markets are not buying a successful outcome, which can be seen by the decoupling of gold prices and real interest rates (Chart 2). Chart 2 – Gold price versus 10-year US real yields (2005-2025) Source: @MichaelAArouet We had hoped Trump would implement a different agenda for America, by united allies through balanced trade and growth. Instead, he has decided to isolate, alienate and re-inflate. Fortunately, the solution to an ever more volatile political landscape remains in Trump’s agenda (Figure 1). Figure 1 – The tripartite system. Source: Christopher Weyant, Vikara Capital As peace in Ukraine slips away, the war in Gaza intensifies, Iranian talks stall and the public shaming of China continues, the America we have been disgruntled with for many years seems unchanged. Elon Musk leaving DOGE tells us all we need to know about the US budget deficit (Chart 3). Chart 3 – Cumulative Budget Deficits by Fiscal Year (2023-2025) Source: @qthomp Sprinkle an extension of tax Trump’s cuts (that were expected to roll off), which Wharton estimates will drive $4 trillion budget deficits over the next four years (Chart 4), and it becomes obvious that inflation isn’t going lower, if at all. Chart 4 – Change in annual biudget deficits by year if the House Big Beautiful Bill is voted Source: Penn Wharton Budget Model, Congressional Budget Office, Joint Committee on Taxation, House Committees, Bloomberg Is it any wonder that global bond markets continue to sell off? The largest economy in the worlds is communicating that it is a sprint to devalue its currency, why wouldn’t global debt continue on its eye watering trajectory (Chart 5)? Chart 5 – World Debt ($ trillion) (1957-2025) Source: Bloomberg, Bravos Research If America has no plans on changing its frivolous fiscal policy, why would Republicans be so focused on enabling digital assets? The only reason we can thinks of is as an insurance policy should Trump’s plan fail. The decline in the US dollar is a picture that talks to this perfectly (Chart 6). Chart 6 – US Dollar Currency Index (DXY) (1957-2025) Source: Tradingview.com, Vikara Capital At the same time as American purchasing power declines on a relative basis, it is also quickly declining on an absolute basis, with the Dow Jones Industrials Index collapsing relative to gold since Trump announced his first round of tariffs on China in 2018 (Chart 7). Chart 7 – Dow Jones Industrial Index (DJI) relative to Gold (1957-2025) Source: Tradingview.com, Vikara Capital The last time the US reshaped the global order (when Nixon removed the US from the gold standard), US purchasing power declined substantially relative to gold (see above). Sadly, this is happening again, except its likely to be relative to gold and Bitcoin. Logically, US bonds continue to crater and 1-year US credit default swaps continue to rise (Chart 8). Chart 8 – Price of one-year credit default swaps on US government debt (bps) (2008-2025) Source: LSEG, Investing.com Early signs of a new order are already being highlighted, with the Taiwan Dollar experiencing its largest strengthening on record as the US-China trade war escalated (Chart 9). Chart 9 – Taiwan Dollar’s Record Move (1985-2024) Source: @amital13 Japan’s bond market is in free fall (Chart 10), with investors realizing the Japan will need to reshore, remilitarization and redevelop despite having a debt-to-GDP ratio of 251%. Chart 10 – Japan’s Super-Long Bond
Vikara April 2025 Update – Turning Point: Global Weakness Creates Digital Strength
April 30, 2025 Vikara April 2025 Update – Turning Point: Global Weakness Creates Digital Strength DOWNLOAD PDF REPORT Trump’s messaging, execution, and sporadic decision making is weighing heavily on markets. The damage has the potential to be lasting with many western economies signalling a potential shift away from Trump’s version of America. It has been interesting to watch western country voters lean left in the wake of Trump’s series of unforced errors. Canadians and Europeans have rallied around incumbent leaders and parties who have pushed back on tariffs, offers to buy countries, and the political games being played via truth social. Australia is no different, with a further move to the incumbent leftwing labour party despite unpopular policy initiatives like a plan to tax unrealized capital gains or large-scale immigration. In a world where most western governments are left leaning, Trump will have a tough time implementing his desires. As a result, global growth will suffer and money printing will need to rise. Central banks are currently focused on inflation, but markets are looking through the short-term impacts (Chart 1) and are increasingly more concerned with lower growth. Chart 1 – Inflation swap rates are seeing short term and transitory inflation (2024-2025) Source: Bloomberg, Luke Kawa – Sherwood Digital assets should do well with this backdrop, with prices in the second half of April sniffing out a potential turning point. If the US can complete trade deals or it relaxes its strategy, while central banks proactively step in to fill Trump’s growth air pocket, duration assets will outperform. While we have been calling (incorrectly) for lower inflation for a while, much of the data we see suggests that it is finally upon us. Everything from crude oil to rental markets seems to suggest that disinflation is real. Again, a very positive backdrop for digital asset markets. We continue to look for and invest in a portfolio of digital assets with a premium product-market fit, great teams with solid track records, and valuations that we can defend. While it has been a volatile few months in digital asset markets, it is good to see things turn quickly with a changing backdrop. In summary, macroeconomic data points are now poor enough for many to consider shifting their views on global rates moving forward. It is becoming blatantly obvious that central banks are offsides if the slowdown that is upon us is real. While the US Federal Reserve needs to navigate the short-term potential impact from tariffs, its dual mandate is becoming more relevant. For this reason, we believe we are finally at a turning point in the macro outlook such that duration assets like digital assets are finally the place to see outperformance. Macro US consumers are under considerable pressure right now. Households are as concerned as they have ever been about their future financial situation. This is a Trump unforced error, as communication and execution of his Make America Great Strategy has been lacking (Chart 2). Chart 2 – UMich Expected Change in Financial Situation in a Year (1980-2024) Source: @LizAnnSonders Consumer expectations for business conditions also tanked in March to lowest on record per the University of Michigan’s sentiment survey (Chart 3). Chart 3 – UMich Expected Change in Business Conditions in a Year (1980-2024) Source: Bloomberg, @LizAnnSonders Consumers also feel negative about their employment situation, with 67% expecting a change in unemployment in the year ahead (which is the fifth consecutive increase and highest since 2009) (Chart 4). Chart 4 – UMich Expected Change in Unemployment During the New Year (1980-2024) Source: @LizAnnSonders Consumer sentiment is also being increasingly impacted by mortgage stress, as fixed term interest rate resets start to roll over, pushing 6.1 million Americans behind on their mortgage payments (the highest in 20+ years) (Chart 5). Chart 5 – Freddie Mac Seroius Delinquency Rates (2004-2025) Source: @TaraBull808 Consumer expectations regarding employment are being dictated by rising US company bankruptcies, which are approaching the same levels as seen in Covid and the GFC (Chart 6). Chart 6 – Weekly bankruptcy Filings (2006-2025) Source: @GlobalMktObserv Business stress has resulted in rising US job cut announcements, reaching levels that have surpassed the financial crises (Chart 7). Chart 7 – Challenger, Gray and Christmas Job Cuts By Industry (1994-2024) Source: Doubleline, Challenger, Macrobond, @GlobalMktObserv Bank of America’s global fund manager survey expectations for a recession have risen to the fourth highest level in the past 20 years (Chart 8). Chart 8 – Recession Expectations Rise to 4th Highest Level in Past 20 Years (2006-2026) Source: BofA Global Fund Manager Survey, @MikeZaccardi It is very likely that much of the negativity is driven by US inflation expectations, which have spiked to 6.7%, the highest level since 1981 (Chart 9). Chart 9 – Twelve-month Inflation Expectations (1980-2020) Source: University of Michigan, LSEG, @charliebilello Higher inflation expectations are flowing through into an expectation of higher for longer Federal Reserve policy, despite US Super core CPI being down sharply (Chart 10). Chart 10 – US Bloomberg BLS CPI Core Services Less Shelter YoY (2015-2025) Source: @LizAnnSonders While everyone is panicked about higher inflation, we continue to believe lower inflation is on the horizon. The ISM inventory divided by orders ratio is supportive of a second quarter slowdown and a decline in input prices (Chart 11). Chart 11 – Orders to Inventory ratio LEAD prices by 3 months (2000-2026) Source: @AndreasSteno, Bloomberg, and Macrobond While markets are pricing in four Fed rate cuts this year, we believe this accelerates quickly should lower inflation data be seen post the implementation of tariffs (Chart 12). Chart 12 – Financial markets are expecting looser Federal Reserve policy (2024-2025) Source: TheDailyShot.com, @SoberLook It is worth pointing out that digital asset markets (including the ex-BTC/ETH markets) were at cycle highs at the start of 2024 when markets had priced in six fed rate cuts in 2024. The setup today is wildly different, and things turn quickly in the space. If we are right, then Chart 13 is a potential
Vikara March 2025 Update – Breaking the Cycle: Crypto’s New Macro Reality
March 31, 2025 Vikara March 2025 Update – Are we there yet? DOWNLOAD PDF REPORT Trump’s second term has started counter to the way many believed it would. Instead of buoyant markets, global investors feel like they have been rug pulled. It has been a perfect storm. The US treasury department has been on parade telling everyone that a recession is ok if it brings down inflation, the Fed remains behind the curve as Trump has them convinced tariffs will bring inflation, and Trump is doing mostly what he said he was going to do. Most of what we are witnessing today is a combination of seasonality, a hangover from the prior administration running down all available liquidity post the election, and a stubborn Federal Reserve that seemingly refuses to be data dependent. Chart 1 – S&P500 indexed to inauguration day Source: @OwenWntr Leading inflation indicators have been moderating for months, and while many worry that a rebound in the industrial economy will create a second wave, it seems very unlikely given both consumer and industrial markets are weakening. The opportunity right now in digital assets seems the same. Sentiment sucks, long term believers are negative, positive catalysts are being sold, and token prices remain lacklustre. Ironically, this is happening as the macroeconomic backdrop finally moves closer to being supportive of digital assets. It reminds us of a saying we heard from a 30-year tenured portfolio manager at T-Rowe Price (a fundamentally driven, long term and long only investment manager), where he said, “If you liked the stock at $10, you must love it at $2.” The digital asset space is on discount, and it is an opportunity. We remain convicted in the portfolio we own, the businesses being built, and the use cases they have set out to capture share of. Are we too early? Perhaps. But does it matter if the prices paid are at fractions of what they are potential worth? Over the long run, it shouldn’t. In the short term the market likely remains volatile. In the long run, particularly if the Republicans can eventually pass tax reform, there is a lot to be positive about. Global M2 is rising, inflation is easing, rates are declining, the US dollar is weakening while China and Europe are trying to ease. The backdrop for risk assets remains reasonably positive given the weakening of the US consumer is going to increasingly force the Fed to get off the sidelines and step in to support the economy. At that point, Trump and Bessent can focus less on bond prices and more on equity prices. Macro Consumer sentiment demonstrates everything we need to know about the current state of the US economy. It is as bad as it has been for a long time. (Chart 2). Chart 2 – Consumer Confidence and stock market (1971-2021) Source: @InvestInAssets Consumer expectations of business conditions are also negative, with many predicting much harder times ahead (Chart 3). Chart 3 – Expected Business Coordinations in 1 year: Worse (%) (1980-2024) Source: Apollo, @Birdyword This sentiment is now showing up in segments of retail sales, with food service and drinking places sales down considerably in 2025, demonstrating a clear pullback in discretionary spending (Chart 4). Chart 4 – Retail Sales: food service and drinking places (monthly % change 3m-avg) (2023-2025) Source: Charles Schwab US consumer vacation plans are at their lowest levels since 2020, another sign that consumers are curtailing discretionary spending (Chart 5). Chart 5 – Vacation Intended in the US within 6 Months (1978-2024) Source: @KobeissiLetter Businesses outlooks for the next 6 months are also uncertain, moving into contraction and at the lowest levels since December 2022 (Chart 6). Chart 6 – US Business Leaders Surveu Business Activity Expected in Six Month (2005-2025) Source: @LizAnnSonders Unemployment expectations have surged to levels only seen in the University of Michigan survey during recessions (Chart 7). Chart 7 – Expected Change in Unemployment During the Next Year (1965-2025) Source: University of Michigan, BCA Research, @PeterBerezinBCA These expectations are self-fulfilling as many are likely already noticing the impact of rising job cuts across the US (Chart 8). Chart 8 – Challenger job cuts (2006-2026) Source: @HenrikZeberg Manufacturing indices aren’t great either – even though many continue to point to ISM data as a turn in the economy. It is impossible to handicap how much of this demand is pulled forward ahead of potential tariffs (Chart 9). Chart 9 – Blue: US Empire State Manufacturing Survey General Business Condition SA / Orange: US Empire Sate Manufacturing Survey Number of Employees SA (2002-25) Source: @LizAnnSonders The Philly Fed manufacturing survey supports our pull forward thesis, with new orders expected to decline considerably in the coming 6-months (Chart 10). Chart 10 – Philly Fed: Percent Expecting Increase in New Orders (6 months) (1968-2023) Source: @DannyDayan5, Phillidelphia Federal Reserve Which brings us to our point: How is inflation going to rise if the consumer is tapped out and manufacturing demand is soft? It isn’t. Look at the real time truflation trends versus expectations of inflation. We don’t see where the fear of inflation is coming from (Chart 11). Chart 11 – Truflation vs University of Michigan Inflation Survey (2020-2025) Source: Steno Research, Bloomberg, MacroBond, @AndreasSteno All of this leads to our conclusion that the Federal Reserve is offsides with its monetary policy, and given the data is now very supportive of this, it will need to pivot from being overly cautious to actively supportive (Chart 12). Chart 12 – Trufation vs US 10-year Bond Yields (2023-2025) Source: Steno Research, Bloomberg, Macrobond, @AndreasSteno Which brings us to the final part of the puzzle, as yields fall, and global economies stimulate, the US dollar can continue to ease (as it did in Trump’s first term) (Chart 13). Chart 13 – DXY after a Trump Election (2016-2024) Source: Steno Research, Bloomberg and Macrobond All of this to say that many pre-conditions required for a bull market in digital assets are now here. All we
Vikara February 2025 Update – Crypto in the eye of the storm, but clear skies ahead?
February 28, 2025 Vikara February 2025 Update – Crypto in the eye of the storm, but clear skies ahead? DOWNLOAD PDF REPORT Trump’s economic air pocket is here, and it is setting up the catalyst required for an alt season. We have been talking about a softer US economy for months, and while the last of the data rolls out from an irresponsible Biden administration, and US growth slows, the macro cycle is turning. Markets have quickly assumed Trump’s sporadic way of tackling an endless series of geopolitical and economic negotiations in public is poorly planned and creates unnecessary uncertainty which is accelerating the grind lower of global growth. The contrarian view is that Trump is executing an intentional strategy to engineer a short and sharp slow-down to lower rates, inflation and the US dollar. Trump’s largest and most immediate problem to fix is the wall of short-term US debt Biden left him. A priority for America First. Figure 1 – Trump’s plan to get rates, the US dollar and inflation down is becoming clearer Source: Grok, X.com To do this, Trump needs Powell and the other Fed governors to believe he is willing and capable of driving the US economy into a recession for the good of the long-term health of the US. If they question his resolve, they may not act. This is the art of the deal. Trump has convinced allies that he is exiting NATO, US corporates that austerity is coming, and the media that a private sector depression is close. He is breaking many of the drivers of inflation while convincing Americans that risks are tilted to the downside. With this in mind, it makes sense that Trump isn’t publicly focused on the debt ceiling negotiations or the refinancing predicament, despite these being the two largest problems he has inherited. Markets have quickly forgotten that Trump is a master of misdirection. Digital assets have been caught up in the uncertainty, with a combination of Trump’s tactics, the Fed’s higher for longer uncertainty, and a professional looting expedition after a string of meme coins pulled liquidity from the market. All of these are short term issues and not structural. Call us optimists, but this is exactly what is needed for an alt coin cycle to begin. The “it happens every four years” crew are broken, the “crypto is worth nothing” voices are loud, and the Bitcoin Maxis are back on the “BTC is the only coin” thing. What a perfect backdrop for altcoins. Sentiment sucks, the macro is changing, digital asset duration is cheap and a mid-cycle pullback has created a chance for those uninvested to buy the dip. The question is will they? Macro The US private sector, which is what Trump wants his presidency to be judged on, is dire. US private sector hiring has been in a recession for 29 months, the longest streak since the 2008 (Chart 1). Chart 1 – US Hiring: Total Private Sector (2001-2024) Source: U.S Bureau of Labor Statistics, @GlobalMktObserv Private worker hours have fallen to the lowest since March 2020 (Chart 2). Hours worked haven’t been this low since June 2010, when the unemployment rate was 9.4% (as opposed to ~4.0% today). Chart 2 – Average Weekly Hours of All Employees, Total Private (2008-2024) Source: @RudyHavenstein Private America wasn’t Biden’s priority, but it is Trump’s. This is why we believe Trump is determined to see prices of long-term bonds rise more than equity markets right now. If he brings down rates, he will restart the private sector (Chart 3). Chart 3 – iShares 20+ Year Treasury Bond ETF (blue) versus the S&P500 (red) (Jan-Feb 2025) Source: Tradingview.com, Vikara Truflation is showing the real time decline in inflation, suggesting Trump’s policies are already having the desired effect (Chart 4). Chart 4 – Truflation vs 10-year US Bond Yields (2023-2025) Source: Steno Research, Bloomberg and Macrobond, At the same time, corporates are talking less about input price inflation, something that will mitigate their need to raise finished goods prices (Chart 5). Chart 5 – Mentions of Inflation on Earnings Calls (2016-2025) Source: Bloomberg, TheDailyShot.com Service inflation is also moderating and leading indicators like other service job openings suggest this trend is likely to continue (Chart 6). Chart 6 – Other Service Job Openings versus Core Services CPI (less Shelter) (2017-2025) Source: @AndreasSteno Consumer sentiment and demand is also tapering back, with January’s retail sales printing the worst decline in a year (Chart 7). Chart 7 – US Retail Sales (2022-2025) Source: US Census Bureau, @MikeZaccardi Labor markets have loosened, with job cuts hitting an all-time high in February, driven by thousands of retail store closures and Trump admin layoffs of probationary employees (Chart 8). Chart 8 – MacroEdge Job Cuts Tracker (2023-2025) Source: @MacroEdgeRes The New York Fed’s Business Services Index shows activity is rolling, reaching its lowest reading since December 2023 (Chart 9). Chart 9 – US Business Leaders Survey Business Activity Current Conditions (2005-2025) Source: @LizAnnSonders The US services sector likely contracted in February, dropping below 49.7 points, the lowest in two years (Chart 10). Chart 10 – U.S Services Purchasing Managers Index (PMI)(2015-2025) Source: Investing.com, @GlobalMktObserv All of this to say that the cracks we have been pointing out for months are now obvious to the majority. But while consensus starts to panic, a new manufacturing cycle is underway, which is supportive of weaker data being an air pocket instead of something more sinister (Chart 11). Chart 11 – New Orders Less Inventory vs Manufacturing PMI (Lagged 2 Months)(2008-2024) Source: TheDailyShot.com, Bloomberg Finance L.P. Since the election, small, medium, and large US enterprises alike have been saying that they plan to expand their capacity sharply (Chart 12). This capital will take time to be deployed, but it is a positive backdrop for the US private sector. Chart 12 – US Capital Spending Plans: Regional Businesses, CEO’s, Small Businesses (2006-2024) Source: LSEG, Yardeni Research, Regional Federal Reserve Banks, Business Roundtable and National Federation of Independent
Vikara January 2025 Update – A new dawn for the crypto industry
January 31, 2025 Vikara January 2025 Update – A new dawn for the crypto industry DOWNLOAD PDF REPORT The truth isn’t afraid of being questioned. Trump’s freeze in three plus trillion of US foreign aid and government spending may finally prove that inflation is driven by fiscal and monetary irresponsibility. We believe US inflation declines quickly in 2025, which will be very supportive of digital assets. Trump is forcing fiscal responsibility, by shrinking and increasing transparency in spending programs, enabling private business growth through incentives and tariffs, and executing his promise of pivoting the direction of the US back towards its own borders. Love him or hate him, America has pivoted, and this requires an updated macro framework. While it is a much smaller country, Argentina’s Milei has shown that governments can reverse inflation quickly with cuts to government spending. In a mere 12 months, Argentina’s inflation has moderated by 60% from the highs (Chart 1) Chart 1 – Argentina inflation (%YOY) [Red line shows when Milei took office] (2009-2024) Source: TradingView.com Trump is about to Milei the US, putting the balance of risks for inflation to the downside, in our view. A strong border and deportations will create rental slack, a shrinking government will loosen labour markets and Made in America will accelerate capex. Tariffs are unlikely before inflation is under control and even then are unlikely to be implemented across a wide swath of the economy. The Federal Reserve will need to see this substantial shift in the macro landscape before acting, but it continues to commit to being data dependent, which is the best possible place if it can indeed act quickly in the event our thesis is correct. While digital assets (outside of Bitcoin) have been volatile, the combination of poor sentiment and the incoming pivot in monetary policy bodes really well for the space. Tighter fiscal policy will drive looser monetary policy. The 2025 setup remains very supportive, in our view. We have taken advantage of the recent volatility and increased weightings across our best ideas, with many of them sold heavily post the pivot at the December Fed meeting and the launch of the Trump meme coin. While many are questioning whether we will ever have an altcoin cycle again, we have never been more convicted that 2025 is the year of price growth. Macro cycles drive investor allocation and digital assets, not four-year egg timers or unlimited banana zone charts. The cycle is here, and we are positioned for it. Macro Starting with Argentina, which has spent the past twelve months walking the path that Trump is trying to replicate, shows how quickly a budget surplus can occur post the adoption of a sustainable fiscal spending plan (Chart 2). Chart 2 – Argentina government budget balance (ARS Billion) (2017-2024) Source: TheDailyShot.com Once the money printer is turned off, and expectations of an ever-growing budget are realigned, pricing expectations fall quickly. Argentina’s inflation is now rapidly declining (Chart 3). Chart 3 – Argentina CPI (MoM) (2017-2024) Source: TheDailyshot.com In response to lower inflation, Argentina’s central bank has been able to quickly pivot to looser monetary policy (Chart 4). We expect US monetary policy follows a similar path. Chart 4 – Argentina’s inflation versus rates (2018-2024) Source: Refinitiv Eikon, BCRA, TheDailyShot.com People still fear another wave of inflation, despite fiscal and monetary policy reverting back to trend (Chart 5). We do not see the required backdrop for another wave of inflation, but quite the opposite. Chart 5 – Real M4 Money Supply (Index) (2012-2026) Source: @EPBResearch Cleveland Fed’s New Tenant Rent, the base rent a tenant pays for newly leased space, declined 2.43% in December. Assuming all tenant rents follow, over 30% of the US CPI basket may become a tailwind to CPI (Chart 6). Lower immigration and the potential for larger scale deportations also decreases demand. Chart 6 – New Tenant Rent (YoY) [white] and All Tenant Rent (YoY) [yellow] (2004-2024) Source: @TheBondFreak Then there is the freeze for federal government employees, which has been running at 350,000 jobs per month. This freeze will see labour market slack created, even if there are government employees working second jobs (Chart 7). Chart 7 – New Hires: US Government (2022-2024) Source: FRED While manufacturing optimism and future orders are rising, job openings remain in a downward trend and are getting back to a place that seems much more balanced (Chart 8). Chart 8 – Manufacturing Job Openings (2000-2024) Source: MacroEdge Research, JOLTS The US manufacturing sector should strengthen from here, but a rebound in capital expenditure will take time to flow through to new hires (Chart 9). Chart 9 – Capital Spending Intentions (2002-2025) Source: @RenMacLLC Wage growth continues to suggest a more balanced US labour market, with the Atlanta Fed wage growth tracker continuing its downward trend through December (Chart 10). Chart 10 – Atlanta Fed Wage Growth Tracker Median Wage Growth (1997-2024) Source: @LizAnnSonders While we have been told US labour markets are strong, official labour market statistics continue to be revised lower. In 2Q24, official job market statistics show a 163,000 net employment decline, with eight out of the 13 industry sectors declining (Chart 11). Chart 11 – Quarterly private sector gross job gains and losses (seasonally adjusted) (2023-2024) Source: BLS Backwards looking US government labour statistics are at odds with many of the real time statistics that we are focused on. Layoff and hiring rates being at all-time lows at the same time supports our view that labour markets are well balanced (Chart 12). Chart 12 – Layoff Rate: Cyclical Sectors and Hiring Rate: Cyclical Sectors (2001-2025) Source: @EPBResearch If it wasn’t for the uncertainty around US trade policy (Chart 13), markets would be much more focused on the economy slowing and would be calling for looser policy from the Federal Reserve. Chart 13 – US Trade Policy uncertainty index (1985-2030) Source: Goldman Sachs; @WallStJesus Trump has been clear that he will focus on inflation before moving to trade policy. As
Vikara December 2024 Update – A Bullish Outlook for Digital Assets in 2025
December 30, 2024 Vikara December 2024 Update – A Bullish Outlook for Digital Assets in 2025 DOWNLOAD PDF REPORT We hope you all had a great holiday season and wish everyone peace, prosperity and health in the coming year, the year of the crypto bull, at least in our zodiac calendar. To our LPs, we express our gratitude for entrusting us to manage your capital. Here’s to a profitable 2025. We believe digital asset prices are significantly higher by the end of 2025 for the very simple reason that markets think China’s problems are temporary while US problems are permanent. Neither are true. Despite this outlook, changes in consensus are volatile, and this time will be no different. Trump is such a good negotiator that he has convinced rate markets, currency markets, half of the Federal Reserve, the US Treasury, and most US trading partners that this time is different. All of these markets have priced in a very hawkish scenario before he has stepped into the White House. While everyone is focused on the US, China is in the early stages of a sovereign debt crisis. Its decision to crush confidence, lock up entrepreneurs for success, and to destroy its people’s net worth (their homes) will prove to be a horrifying decision for Xi. Fixing it will require drastic change. The market believes China’s collapse will happen without reverberation. We don’t. The air pocket China will create is the tailwind that drives digital assets higher as global rates decline, ex-US stimulus efforts drive currency devaluations, and US trade policy impacts global growth. Everything changes on January 20th. Trump knows a strong US dollar hurts the US trade deficit and that high rates hurt US growth. Markets seem anxious, and rightly so, given there are many moving pieces. What we are certain of is that the head winds of the last four years are shifting. Chart 1 – US Dollar Index (Rebased to Election Day) [Grey: 2016/17, Red: 2024/26] (2016-2025) Source: Refinitiv, Pitet Asset Managemet, @steve_donze Macro The largest theme in macro markets is the collapse of China. Its 30-year yield tells us everything that we need to know about the state of its sovereign debt crisis (Chart 2). It is bad and getting a lot worse before it gets better. Printing money isn’t going to be enough this time. Change is required. Chart 2 – China 30-year yield (2024 versus rate (2015-2025) Source: TradingView.com, Vikara Capital The pivotal piece of the entire China narrative centres around the CCP owning everything, meaning that none of the debts can be called and ultimately everything ends with the government. While we do not proclaim to know who is holding the bag, this assumption seems naïve. China’s total debt market is ~$14 trillion, of which around 18% is foreign owned debt (the ones holding the bag). This does not include the debt sitting on state owned enterprises, nor the leverage ratios these entities are trading with if their balance sheets were market to market. During the US’s real estate crisis in 2008, it took months for the true extent of the crises to be known. The collapse drove a change of leadership, regulation, and living standards for millions of people. China’s collapse will be no different, and the renminbi will be used as a release valve (Chart 3). Chart 3 – USD/CNY (2023-2024) Source: TradingView.com, Vikara Capital China is facing its longest period of deflation since 1999, with 2008 not even coming close to five straight quarters of deflation. Inflation is one thing, deflation is worse. We haven’t seen this deflation turn up in Western markets yet but expect it to in 2025 (Chart 4). Chart 4 – China’s Economy-Wide Prices in Longest Decline Since 1999 (1997-2024) Source: National Bureau of Statistics, Bloomberg, @KobeissiLetter Households and corporates are doing what they can do de-leverage, while the CCP tries to restart its credit cycle. The problem China has is that it has destroyed moral, and so getting the real economy to start believing that it is ok to resume business is going to be difficult (Chart 5). Chart 5 – No credit cycle since 2021 as households stop leveraging up (2011-2025) Source: PBoC, NBS, WIND, Macquarie Macro Strategy While the government is talking more broadly about increasing credit into 2025, M1 and M2 money supply still indicates that the governments rhetoric is not enough (Chart 6). Chart 6 – M1 beat while M2 missed expectations (2012-2025) Source: PBoC, WIND, Macquarie Macro Strategy Add to that the abysmal bank lending (and the fact that it continues to decelerate, putting pressure on GDP growth (Chart 7). Chart 7 – China Loans of Financial Institutions YoY (2002-2023) Source: @SoberLook While China continues its slow walk into an abyss, investors from all over the world are piling into US markets believing that it is completely immune to offshore economic slowdowns (Chart 8). Chart 8 – Foreign Holdings of US Financial Assets : Allocation to Equities (1953-2023) Source: Topdowncharts.com, LSEG, Federal Reserve FoF Data, @GlobalMktObserv The concern is that Trump creates a second wave of inflation doesn’t seem to make sense to us when looking at the data. The share of Americans expecting to be better off financially over the coming year jumped to its highest level since the Covid-19 pandemic (Chart 9). Chart 9 – Respondents expecting financial situation to be better off over one year (2014-2024) Source: Federal Reserve Bank of New York, @NickTimiraos Confidence is everything. While China is suffering a lack of confidence, the US has the opposite. Confidence flows into behaviours which flows into activity. Take a look at the 1-year forward expectations for food (Chart 10). Chart 10 – 1 yr Price Change Expectations: Food (2017-2024) Source: NY Fed Survey Consumer Expectations, TheDailyShot.com Expectations for rental markets are loosening too, which is happening the same time as vacancy rates return to previous highs (meaning landlords are likely to have less pricing power) (Chart 11). Chart 11 – U.S Rental Vacancy Approaching Highest
Vikara November 2024 Update – Unprecedented Shift Drives Digital Asset Tailwinds
November 29, 2024 Vikara November 2024 Update – Unprecedented Shift Drives Digital Asset Tailwinds DOWNLOAD PDF REPORT We haven’t felt this optimistic about the path forward at any point during our 20+ year careers. Trump winning the House, Senate, and popular vote (all while strengthening Republican control over the supreme court) unlocks enormous potential if you zoom out from the player and observe the game. We start by noting that our portfolio rose ~55% this month, so perhaps our optimism needs tempering even if this period of outperformance has been discussed in our monthlies since we launched the fund in 2022. We also had the opportunity to be interviewed for a piece on crypto in The Australian weekend edition and pressed the go button our Australia feeder fund. A united US can deal with centralized regimes like China, Russia, Iran and North Korea. It can regulate on issues like the border, digital assets, and the sanctity of the constitution as trump winning the popular vote signalled to politicians this was important. In short, Trump (and his team) have more ability to change the course of history than any prior administration in recent years. In our view, a course correction has never been more critical than it is today. Debt, war, inflation, and personal sovereignty are at stake. Trump’s vision of the future of the US won’t necessarily end in four years. JD Vance is capable of carrying the baton for at least four, maybe eight years. There are no new democrats to speak of, and the era of Obama, Biden, and Clinton is over. It’s clear to us that change is now here. A political shift towards centre, a monetary and fiscal turning point, a nationalist pivot away from globalism, and a rise in honest expression over silent compliance. These issues have driven most of the structural imbalances over the past two decades. We believe this change strengthens America’s institutions, grows real incomes, and reduces social division. America is about to invest in itself, its people, and its future. Every single time in history that it has done it has driven a period of rapid growth and technological advancement. Digital assets sit in the middle of these changes. AI = crypto. Free Speech = crypto. Nationalism = crypto. Privacy = crypto. The largest technological change in our generation is in full swing and we cannot convince potential LPs that it is anything more than a series of meme coins. In lieu of a nicely worded pitch on the opportunity we are investing in, a simple chart should suffice. This cycle is just beginning (Chart 1), and Vikara is well positioned to navigate it. Chart 1 – Altcoin Market Cap (2016-2024) Source: @el_crypto_prof Macro Isn’t it amazing how quickly consensus changes? From our view, the US election result was not surprising as it confirmed an undercurrent of change that we have been watching sweep the world. People are fed up with bureaucracy, overspending, and the overreach on personal liberties. While many will never divulge what their opinion of the election was, markets don’t lie. Have a look at the change in Goldman’s sentiment indicator after the election, it is up only (the low occurred at peak Kamala in August 2024) (Chart 2). Chart 2 – Sentiment Indicator (December 2023-2024) Source: Haver, EPFR, Factset, CFTC, Goldman Sachs Global Investment Research, TheDailyShot The collapse in volatility says it all. Markets, and every participant in them, breathed a huge sigh of relief (Chart 3). Lower volatility means more capital can be deployed. Chart 3 – Vix election analogue, days before and after election Source : Nomura, Ollari Consulting Capital investment decisions, which have declined for over three years, have rebounded immediately post Trump’s win (Chart 4). All of a sudden there is a renewed excitement about the growth profile of America and domestic capacity requirements this needs to fulfill. Chart 4 – Capex Plans – Mfg & Services Sectors (2008-2024) Source: Macrobond, Federal Reserve System, Ironsides Macro The transport sector knows what prosperity a strong domestic manufacturing base can bring. Transports are a key sentiment and macro barometer in that these stocks are pivotal to the economic output of the US economy (Chart 5). Chart 5 – Dow Jones Transports (2011-2024) Source: Topdown Charts, LSEG Bond markets breathed a sigh of relief as well, with the average spread for US investment-grade bonds falling to its lowest level since 1997 (Chart 6). Chart 6 – Bloomberg US Aggregate Corporate OAS (1996-2023) Source: Bloomberg, TheDailyShot.com The NY Fed’s index of regional factory activity surged in November post the election result, potentially signalling improvement at the national level (ISM), an encouraging sign that US industry is getting back to work (Chart 7). Chart 7 – ISM Manufacturing PMI (R1) x Empire State Manufacturing (L1) (2007-2024) Source : TheDailyShot.com, @TheTerminal, Bloomberg Finance L.P. A strong outlook for the US economy has resurfaced fears of second wave of inflation. Investor inflation expectations increased sharply post the election (Chart 8). Chart 8 – Percent expecting higher global CPI and higher short term rates (2001-2023) Source: BofA Global Research, TheDailyShot Consumer perceptions of inflation uncertainty have been increasing, with the view that tariffs may lead to rising prices (Chart 9). Chart 9 – US Inflation Uncertainty (orange) versus YoY CPI (black) (2015-2024) Source: Daniel Curtis, Bloomberg We are much less worried about inflation as falling energy prices will continue to provide tailwinds for lower inflation (Chart 10). Chart 10 – Brent Crude Oil (L) versus USD 5yr Inflation Swap (R) (2022-2024) Source: TheDailyShot.com, @TheTerminal, Bloomberg Finance L.P. The Fed fund rates is a long way above inflation and the terminal rate, meaning that it has room to move lower even if inflation tracks sideways or rises modestly from here (Chart 11). Chart 11 – Fed fund rates versus the US terminal rate (2024) Source : @TheTerminal, Bloomberg Finance L.P, TheDailyShot.com Lastly, labour markets are back to equilibrium, with job openings in October being the fewest since January 2021 and quits