The New Laws of Wealth Are Written in Code

A regime built on perpetual debt and cheap money is approaching its tipping point. For decades, deficit spending was a background constant sustained by falling interest rates, unquestioned demand for Treasuries, and the perception that sovereign debt was sacrosanct. That illusion is dwindling. Debt-to-GDP ratios have surged to landmark highs, with the USA approaching the 130% threshold. In past crises, crossing this line often marked the transition toward devaluation, restructuring, or outright default.

Chronic deficit spending, debt-to-GDP ratios at wartime levels, and surging bond yields have collided with a dollar that weakens even as real rates stay elevated. This is not supposed to happen. For half a century, gold’s rallies coincided with suppressed real rates. Today’s divergence signals that trust in sovereign debt is eroding so rapidly that investors are willing to own a zero-yielding metal at record prices rather than funding governments at 4–5%.

The illusion held because debt service cost was manageable. Debt loads were modest in absolute terms, and ever-declining bond yields from 1980 onward meant governments could refinance larger obligations at cheaper rates. However, that era is over; rates have normalized higher, the debt tower grew far taller, and the refinancing burden compounds year after year. What was once sustainable under declining yields has become untenable under rising ones. In this inversion of the old order, the risk-free rate is now the rate that risks the system itself.

As we know from previous terms of office, fiscal dominance leaves little room for reversal. It is vastly unlikely that the next president will campaign on austerity. History demonstrates that once deficits become enshrined, they rarely shrink outside of extraordinary circumstances such as the fleeting budget balance of the late 1990s. No leader wants to be remembered as the one who tightened belts and cut spending in the name of discipline. What we are witnessing are symptoms of a broken model where growth is always promised and sacrifice always deferred. Instead, the sacrifice landed squarely on investors, as Treasuries slumped into their longest drawdown ever. For 60 months and counting, they delivered deeply negative total real returns despite their coupon, leaving the 60/40 model discredited. As both cash and government debt are missing their core mandate as reliable capital anchors, markets are repricing what constitutes safety, scarcity, and sovereign exposure.

Hard Assets in the Age of Fiscal Dominance

If bonds and cash no longer preserve wealth, where does capital flow? Capital instinctively seeks harder ground. Central banks are buying bullion, pushing official sector demand to a 30-year high. BRICS nations, now larger than the G7 in GDP measured by purchasing power parity, are shrinking Treasury exposure in favor of gold.

Yet gold is only half the story; the other half is digital. Bitcoin’s mechanics remain unmatched with a fixed supply hard-coded at 21 million, immune to political discretion, portable across borders, auditable in real time, and impossible to debase. It is emerging as a reserve candidate, and language once reserved for oil or gold is now applied to cryptographic assets. Governments, sovereign wealth funds, and even US policymakers are openly debating strategic Bitcoin reserves and digital asset stockpiles. Alongside this, institutional investors are turning to Bitcoin as a complementary hard asset. Since 2015, Bitcoin delivered annualized real returns of 75%, outpacing every other asset class. As we have established in prior publications, Bitcoin strengthens portfolios through diversification, consistently improving risk-adjusted returns, while institutional flows erase its last criticism by compressing volatility to levels even below major tech equities. With sophisticated allocators internalizing this new reality, the adoption curve bends away from retail to institutional.

Interest Beyond Bonds

In our view, the digital story of this transition is not Bitcoin in isolation. Running in parallel is Ethereum’s evolution into the financial operating system. Ethereum rapidly emerged as a second institutional pillar, underscored by ETFs and treasuries absorbing close to 8% of Ethereum’s supply year-over-year. Where Bitcoin is digital gold, Ethereum functions as an internet-native bond, a programmable settlement layer that already anchors stablecoins, tokenized assets, and the lion’s share of DeFi liquidity. Importantly, staking yields provide an on-chain ‘risk-free rate’ untethered from fiscal erosion. Thus, for allocators seeking yield without sovereign risk, Ethereum represents a structurally scarce, yield-bearing treasury asset embedded in the infrastructure of the digital economy.

Based on our analysis, adding a dual-core allocation of Bitcoin and Ethereum to the 60/40 reshapes what a modern portfolio can look like. In that setup, Bitcoin provides the monetary anchor in a world of deficit-fueled devaluation; Ethereum provides yield and exposure to programmable digital infrastructure. Together, they can diversify and strengthen portfolios beyond what either asset offers in isolation.

The Fuse Is Lit

We may be living through the early stages of what Mises once called the crack-up boom. Bonds and cash are failing their core mandate as the scaffolding of fiat trust buckles. Deficits without restraint, currency debasement without apology, and asset prices that levitate not solely on fundamentals but on distrust of fiat itself. In this environment, capital preservation means abandoning the illusion of risk-free sovereign paper. For high-net-worth individuals and institutions alike, the allocation decision is no longer whether to own crypto, but how much.