🥛 Why we’re not buying the bounce (yet) 🤨

GM. This is Milk Road, the crypto newsletter that's the fast pass at the crypto theme park.

Here’s what we’ve got for you today:

✍️ Why we’re not buying the bounce (yet).
🎙️ The Milk Road Show: Three Bullish Signals Just Hit At Once… Is the Bull Run Back On? w/ John Gillen.
🍪 SBF’s appeal was just denied.

Bridge just released a free guide called “The Stablecoin Playbook” that covers the most prominent real-world use cases for stablecoins. Download the free guide now.

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WHY WE'RE NOT BUYING THE BOUNCE (YET) 🤨

Every Monday, the Milk Road team piles onto a call to argue about what's moving markets and what we're watching for the week ahead.

As always, we’re letting you sit in on it.

This week, the mood in the room was suspiciously good. Trump's Iran peace deal looks set to sign Friday. Oil slid to around $80 a barrel. Crypto's green almost everywhere you look.

Everything is screaming up-only.

Which is exactly why we got skeptical.

Let’s start with the charts, because that's what most of you came for.

Bitcoin's clawed back toward $67K. Ethereum's pushing $1,800, and most coins are sitting 5-10% off their recent lows.

Looks lovely. But John's not convinced.

To him it's still a dead cat bounce. His line in the sand: Bitcoin has to clear $74K and turn that level into support before anyone gets to call a bottom. 👇

Source: TradingView

Until then - it's nice to look at, but a long way from safe.

The bounce isn't happening by accident though. The Iran deal dragging oil lower is doing real work - cheaper oil means cooler inflation pressure, and a market that breathes a little easier.

It also hands the Federal Reserve a very convenient excuse…

The FOMC meets Wednesday, and John reckons they’ll hold rates steady. But by the Fed's own rulebook, they should probably be hiking.

Headline CPI (the main inflation gauge) is running at 4.2%, above the 3.75% Fed funds rate (the Fed's benchmark short-term rate).

When inflation runs hot above that line, the textbook move is to raise.

But Fed chair Kevin Warsh doesn't want to. The peace deal and cheap oil give him cover to shrug and say "inflation's fine, we'll hold."

Great for risk assets today - but a bill stored up for later.

And "later" is where it got interesting…

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WHY WE'RE NOT BUYING THE BOUNCE (YET) (P2) 🤨

The reason the Fed wants markets running hot is pretty simple:

America is trying to grow its way out of its debt pile. The thinking goes: run the economy fast enough, and you outpace what you owe.

The engine for all that growth is AI spending, and the numbers are getting silly. NVIDIA's raising $20B in bonds. Google just raised $80B. Free cash flow across Big Tech is drying up as everyone borrows to fund the buildout.

John’s base case from here is a few months of "digestion" - markets chopping sideways while capital gets pulled into the buildout and fresh listings like SpaceX - before grinding higher again.

His take on the whole ‘run it hot’ setup: "This could go pretty bad. But if it works? Holy s h*t."

That's where Martin played the skeptic. His concern was demand.

What if we've already hit peak AI usage?

The demand that justifies all that CapEx could wobble if the labs start charging real money for AI usage, and the government starts throttling frontier models over safety concerns - like so:

Source: Anthropic

Martin’s still bullish. The conditions are too good not to be. But he's watching for cracks.

So he's hedging.

Martin's pick (if the AI trade gets shaky) is ServiceNow - the company best placed to orchestrate all these new AI agents and turn token spend into actual productivity inside big organizations.

If AI really does start eating jobs, that's a business that wins either way.

(He went deep on it in a PRO report last week, here.)

So that's where our heads are heading into the week:

Riding a green wave without trusting it, watching $74K on Bitcoin, this week’s Fed meeting, and any early sign that AI demand is cooling.

I.e. We’re bullish, but keeping our eyes wide open.

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Mike Novogratz: The U.S. has $40T of debt and there's only one way out - "inflate it away. Period. End of story."

Jordi Visser: The agentic population is growing - but people still haven't made the connection on how this will effect the economy/business cycle.

Byyyye: SBF’s appeal was just denied. 25-year sentence stands.

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