The Market

Etherfuse

The Market by Etherfuse provides subscribers with strategic insights into the global bond market, focusing on empowering individuals with insight into what is going on in the world of bonds, in a digestible format. etherfuse.substack.com

  1. 10/14/2025

    Dollar Strength or "Other" Weakness?

    After a horrible year to date performance, the US dollar bounced off its low, with a weekly return of +.83% and a monthly return of +2.25% as of October 14, 2025 Is this the inflection point, the start of a rally? This is an important question for crypto investors because USDC and USDT dominate the stablecoin market. Whatever happens in US dollar stable will reflect on crypto overall. A strong USDC and USDT are good for crypto overall. Major drawdowns are not good. To answer the question of whether this could be an inflection point or not, we have to determine whether the positive movement of the US dollar this past week was due to US economic and financial optimism, or to problems in major currencies, like the Euro, the Yen, and UK pound. If it is due to problems in the Euro, Yen, or UK pound we have ascertain if the problems are short-term or structural. If the move upwards in the US dollar is due to near-term negatives of other currencies, US dollar strength may not hold once the concerns have been resolved. To note, it is clear US dollar strength was not driven by improving economic fundamentals, or the rectification of structural or systemic problems such as the government shutdown and policy uncertainty. When the Euro, Yen, and UK Pound are looked at, the common denominator explaining weakness seems to be political uncertainty. If a significant part of currency weakness is attributed to political uncertainty, negative pressure may not last long. Political problems are usually transitory in nature, not systemic of structural. Political uncertainty is like a cold or flu. With time, it passes and is rarely a chronic disease. Looking at the political situations in Europe, Japan, and UK, it is not surprising they weakened against the dollar last week. The Yen was hit by political uncertainty when one of the coalition parties in the government said they were leaving the coalition. The Euro is being pressured by political turmoil in France, where President Macron has not been able to form a government. Given France’s economic position in the Eurozone, political concerns will weigh on the Euro. The UK pound was pressured as the government is pushing for higher taxes to remedy fiscal problems, and higher taxes do not shine well on governments in power. So, nothing really changed with the weak dollar fundamentals, but it went up in value. Given the structural problems of the US dollar are still there, it may have seen most of its big move. The problems in Japan, Europe, and the UK look to be more transitory in nature, political, problems that are easier to clear than structural ones. So, we can conclude that recent dollar strength is not attributed to a “strong dollar”, rather uncertainty in the other major currencies. If the structural concerns of the US dollar exist, it is a good idea to increase exposure to an array of foreign currencies like the Euro, the Yen, and the UK pound. Use the dollar strength to take some profit in USDC or USDT and buy some stablecoins or bonds in Europe, Japan, and the UK. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min

  2. 10/08/2025

    Pros and Cons of Euro Stable.

    A battle is brewing in stable currency. The US is winning with USDC and USDT, and China is gaining ground, making a push for the title. Hard to say who is going to win the stable game, but someone will. To show how active this game is, Europe is talking about getting involved; the European Central Bank (ECB) is seriously considering issuing a stablecoin. Last week, a Bank of France Official Agnes Benassy-Quiere compared the US dominance in stablecoin, 90% of the $255 billion stablecoin market, to the Visa and Mastercard duopoly in Europe, a serious issue requiring a sense of urgency. Let’s admit it, if someone has 90% share of anything, it makes sense to try and take market share away. It should be easy pickings. Kenneth Rogoff in his outstanding book Our Dollar, Your Problem says, “If the digital euro develops during a period when Europe is becoming more cohesive and the United States less so, the possibility that a digital euro could extend the currency’s reach could suddenly become quite real”. Can Kenneth Rogoff’s assertion happen, don’t know. But let’s look at some pros and cons, if for no other reason than to be ready for the battle to come. The Pros First, an ECB stable currency would jumpstart European banks to get going and develop digital products, a good thing for financial services overall. Second, The European Union is pretty stable; the global tariff plan has had limited if any economic shock, and inflation is under control. Now may be a good time. Third, the Euro is already the second largest reserve currency in the world, so there is a role for it in the new digital world. Fourth, Euro has been stable to strong against the Chinese yuan +16% in three years, and the US dollar +12% ytd. The interest rate is only 2%, so investors aren’t holding for yield. Thus, there is some fundamental strength. Fifth, the US is presently not cohesive in policy terms, which, in the eyes of Kenneth Rogoff, speaks for European chances. The cons: First, Europeans are very concerned about privacy, and an ECB digital currency would be a privacy risk. The mere fact the government knows so much about a person’s currency use will cause many Europeans to shudder. Second, it could be pure FOMO (Fear of Missing Out). Long-term, decisions based purely on FOMO rarely work out. Third, strength against the Chinese yuan could be a weakness. China is exporting a lot to Europe, and if Europe wants this to stop then they must devalue the currency. A potential devaluation due to China speaks against a solid stablecoin. In the end, if Europe wants a good stablecoin, they can probably achieve it, and it can take market share from USDC. The economy has proven resilient. Investors are willing to hold currency at a low yield. There is probably more cohesiveness in European policy than in the US. The real issue will be against the Chinese yuan. A stable coin needs a stable underlying currency. If there is risk that the Euro will go down to mitigate yuan weakness, a stable may not work. We will see, This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min
  3. "Total Return", All That Matters.

    09/25/2025

    "Total Return", All That Matters.

    The dollar has declined year-to-date by over 9%, and some predict it will decline more. Dollar weakness, and the potential for more weakness, is knocking the dollar off its perch as the global safe-haven investment, the investment investors want to hold when global risk is rising. Many investors are confounded by the disparity between the US dollar and the US stock market. Non-US investors buy US dollars to buy US stocks. If foreigners are buying US stocks, why is the dollar going down? At a minimum, given demand from overseas investors in US stocks, the dollar should be unchanged or a little down year-to-date, not near minus 10% . The answer lies in the concept of total return, a concept that has three main components 1) price or value appreciation 2) yield or interest earned 3) the change in the currency when money is taken back to home currency. Investors must consider all three. Investors are, and have been all year, optimistic about the prospects for US stocks driven by shares in technology and AI. Thus, the US stock market has provided capital appreciation, the first component. Yield has been positive in total return, but not by a lot. In the end, it all comes down to currency. Non-US dollar investors who have made 10% on their US stock holdings year-to-date would be break even if they took the money back into their country right now. They would have no gain. What they made on stocks, they lost on the US dollar going down. To mitigate such a drag on return, investors hedge the US dollar, which protects the investor against currency losses when they return their money to the home. It is called “Hedge America”. “Hedge America” can be tough to understand when using derivatives, but easy to understand when looking at ETFs (Exchange Traded Funds). With ETFs you can buy a hedged or unhedged vehicle. This is the first time this decade that more money has flowed into dollar hedged ETFS than non-hedged. In short, non-dollar investors want to protect the returns US stocks have provided, while avoiding the risk of the US dollar. With total return in mind, and the US total return outlook in question, where should investors that hold USDC or dollar fiat look for investments? In terms of Etherfuse’s offerings, Brazil and Mexico stand out . Etherfuse’s Brazilian Tesouros offer an API of 13.13%%. The currency should be stable to appreciating against the US dollar, since US tariffs have had no effect, and since inflation is stabilizing. 13% yield plus more on the currency is a good total return for a dollar based investor. No promises, but total return could be near 20%. Etherfuse Mexican CETES offer 6.2% API. Official interest rates have gone from 10% at the beginning of the year to 7.75%, while the currency has strengthened, which shows positive sentiment towards the Mexican peso and its forward outlook. 6% plus another 5 or so % on the currency is a good total return when the money is brought back to dollars, either fiat or USDC. The point is there are opportunities out there to achieve a solid total return, a return that includes appreciation, yield, and currency. They may just not be in the US, at present. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min

  4. 09/12/2025

    In Stablecoins, Don't Bet Against China.

    Passage of the Genius Act in the US stirred up a lot of excitement towards stablecoins. The IPO of Circle added fuel to the fire, making US dollar stablecoins a household word. Such recognition and regulation have helped the stablecoin market to double in terms of market capitalization to around $280 billion. Growth has not created a healthy situation; 99% of stable coins are USD backed. Put simply, there is too much concentration in US dollar stablecoin. It is an oversized risk for crypto and investment overall. Defenders brush off the concerns of 99% market capitalization by saying the US dollar is the world’s reserve currency, all either want to or need to hold it. But the reality is that US dollar is only 56% of global reserves. 99% stablecoin versus 56% global reserves? Something is wrong with this relationship; it’s out of balance. A stable coin number somewhere between 56% and 99% seems to make sense. For the 99% to go down, a new stable coin must arise. What foreign currency stable coin can carry this load? What country could take US dollar stablecoin market share? China is a contender. China has been preparing for the digital world. Digital payment platforms like Alipay and WeChat Pay have become two of the biggest payment companies in the world. In 2020 the Chinese government rolled out digital yuan in four Chinese cities. In 2021 they increased the number of cities to 28. Recent announcements show preparation is ratcheting up. Until recently, Beijing was only committed to the development of a sovereign digital yuan. Now they are examining stablecoins backed by yuan, a yuan stablecoin with the exact same mechanics as USDC. This is an astonishing about face for China. For years the currency has been subject to capital controls, and cryptocurrency trading and mining have been outlawed since 2023. This change of heart is serious. As a first step, it looks like they are going to use Hong Kong, the hub for the offshore yuan. Hong Kong just launched its own regulatory regime, which opens this month for tokens and stable coins, with the requirement that all stable coins be backed by highly liquid assets held in reserve. For a country that likes to control its currency, this is good news. Every yuan backed token will take offshore yuan out of circulation from the city’s pool, helping minimize currency weakness Hong Kong Companies are wasting no time. Seazen Group, one of the few Chinese property developers that survived the property crisis, plans to issue tokenized private debt at the end of this year. They also want to tokenize shopping centers. So, we have a market that is too concentrated (US stablecoin), which creates opportunity for a new entrant to take share. We have the second largest economy in the world that has a strong position in foreign trade, changing the regulations and embracing stablecoins. Powerful stuff. Many investment careers have been stained by being overly pessimistic regarding the investment or financial outlook of China. Years ago, it was “it is a communist nation. It can never be a great economy or investment area”; China is now the world’s second largest economy. Later it was “the real estate crisis will finish China off”.; well, since the real estate crisis the market is up, and the crisis is not that big a deal anymore. Finally, “China will be hurt by US tariffs”; there may be some economic pain, but they are still standing The conclusion is that over the long-term betting against China is not a good idea. Stablecoins are no different. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min

  5. 09/04/2025

    Will The Dollar Get The Yips?

    There have been some strange developments this week in interest rates and currencies. First, the European union reported inflation above target, leading to the conclusion that interest rates will not be cut in the near term, rather stay where they are. Normally, one would expect the Euro to appreciate against the US dollar based on a higher Euro yield. And, given investors see a 90% chance of a US Fed interest rate cut, the Euro should have strengthened, and the dollar weakened. This did not happen; the Euro was -.57% shortly after the inflation announcement, and the US dollar, as measured by DXY, rose about the same as the Euro went down. In the case of the Euro, currency weakness may be explained by debt concerns. Borrowing concerns in Germany led to the German 30 year bond going to the highest yield since 2011, the time of the last European sovereign debt crisis. A move so strong in the 30 year expresses the fact that investors are demanding a high rate of interest to compensate for the risk of government financing in Germany. At the same time, French government debt is the key issue in the determination of the new prime minister. As a general statement, regarding Europe, the risk of debt and borrowing is overpowering higher interest rates. If debt and borrowing are the new concerns, the US must watch out. While the Fed decision on interest rates this month is monumental, investors should pay more attention to how the US government is going to stay open past September 30, 2025, without budget adjustments and a new debt ceiling. Also, the magnitude of the interest rate cut, supposedly coming this month, must be taken into consideration. A .25% rate cut is already discounted in bond prices, so its announcement will probably create a whimper for bond markets rather than a bang, hardly supportive. Regarding the borrowing limit, it is no secret that congress cannot agree. Democrats and republicans disagree on almost everything, but there are some republicans who don’t agree with other republicans. These are the fiscal hawks who will push for spending cuts before they vote on more debt. Keeping the US government open will not be easy, which will create uncertainty among investors. Congressional disagreement on borrowing aside, the real issue is upcoming debt issuances; the US 10-year bond auction will be September 10, the 30-year September 11, and the 20-year September 16. The Fed meeting is September 17. If the 10-year or 30-year bond auction go bad, experience low demand , the US dollar could be at risk. To use president Trumps language, the bond market may get the “yips” like it did in April. If the bond market gets the yips, the US dollar will too. When investors demand higher yields for longer maturity government bonds, they are demanding compensation for the risk over time of holding government bonds. Right now, investors are demanding higher compensation with the US 30-year bond hovering around 5%. They seem to believe they are taking a lot of risk in long dated US Treasuries. Investors are signaling that they are worried about the future financial state of the US long-term. Once again, the true test of whether US bonds get the yips will be the upcoming auctions. Close attention be paid to these auctions, and the US had better hope they go well, or the concern that is building will accelerate and show up in dollar weakness, the yips. Given concerns noted above, US dollar, investors, whether fiat of tokenized, should diversify away from the US dollar. At least until more is known regarding the upcoming auctions and the debt ceiling. Although Etherfuse Euro bonds have a low APY of 1.47%, the currency can make up for a low yield if the dollar gets the yips. UK Gilts at an APY of 3.92% could make sense. Probably the standout investments for reducing US dollar exposure are the Mexican Cetes at 6.2%APY and the Brazilian Tesouro at 13.06% APY. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    5 min

  6. 08/26/2025

    When Interest Rates Bail the Government Out.

    If a normal person owed a lot of money and interest was choking their household budget, they would love to go push for a lower rate, to refinance at much better terms. If market rates were high, there would be no chance of refinancing and lightening their interest payments as a percentage of their household budget. Loan markets just don’t work that way. But the rules may be different for the public sector. By pushing for much lower interest rates than those at the present time, the US seeks to implement a “fiscal dominance”, scenario that makes government financing cheap. Given the latest budget bill and the projected debt level it will create, they need lower rates. President Trump even stated this idea when he said the Fed’s benchmark rate should be three percentage points lower than the current 4.25% to 4.5% range, arguing that such a reduction would save $1 trillion a year in interest cost. A comment later shows he is aware of the risk of lowering interest rates when he said, if inflation is a problem the central bank could raise rates. Whiplashed rate movements would not build confidence in the US dollar. He is also doing his best to stack the Fed Board of Governors by putting new members on the board that agree with his view that interest rates must go down. Most recently, a letter accusing Federal Reserve Governor Lisa Cook of falsifying documents for a private loan may give President Trump the chance to stack the board in his favor. Further to stacking the board, President Trump has made his intentions clear to get Powell out and put in a chairman who is more likely to do his bidding. Post Jackson Hole, Fed President Powell is hinting at lowering rates at the September meeting, due to weak labor numbers. In this case he will prioritize jobs over inflation. While this rate cut will probably not be big enough to appease the White House, it could be the start of multiple cuts. The key questions are “how big will cuts be in total” and “how fast”. Will the start of rate cuts get President Trump off Powell’s back? Will they be determined by the White House or will the US Fed stay measured? Aggressive rate cuts support fiscal dominance, creating a lower interest rate to minimize interest costs in the budget. Let’s review the negatives of fiscal dominance. First, it would require a less independent US Fed, which would cause investors to be worried and sell US assets. Second, it could create inflation that cannot be stopped by a quick about face saying, “oops we made mistake and have to raise rates again”. Third, the US dollar would take a hit, a hit too big to easily quantify beforehand. Fourth, a lower interest rate would lead to more borrowing and eventually an even bigger debt problem. All these things can weaken the US dollar. So, if there is even a slim chance of President Trump getting his way, investors should start diversifying away from the US dollar. In times of a weak dollar, emerging market currencies and investments standout, like bonds in Brazil and Mexico. European bonds, even though their rates are low, should do well in a time of a weakening US dollar. In Latin America you can get a good return versus US dollar from high rates and appreciating currencies. In Europe the return versus US dollar will be mostly from the currency. Etherfuse bonds in Brazil, Mexico, and Europe are all good, tokenized options to diversify away from the US dollar. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min

  7. 08/21/2025

    US Dollar, Start Moving to the Exit Door?

    Sometimes at a sports event or concert it is a good idea to start moving for the exit before the end of the event, to get your car out before the rush. The same may be said for US dollar exposure, it may be a good idea to start moving slowly towards the exit. Treasury secretary Bessent said in a televised interview “if you look at any model”, for the fed funds rate, it suggests “we should be 1.5% to 1.75% lower”. The current rate is 4.33%. Bessent says it should be 2.6%. This doesn’t make any sense, and it is certain that this level has never been discussed at a single Fed meeting, even if some members are lobbying for lower rates. In secretary Bessent’s comment, the concerning words are “any model”. The US Treasury Secretary should not make comments like “any model”. This is naïve, silly, and embarrassing. If one of his analysts at his hedge fund had said something like this, he would have given him a dressing down. There are models that suggest rates should be higher, like the Taylor Rule, named for John Taylor a Stanford economist. He tried to walk his statement back the next day, but the damage was done. If Secretary Bessent keeps contradicting himself, he is going to lose credibility. On the one hand he says rates should go down, which he knows will crush the dollar, On the other hand he has been trying to convince investors that a strong dollar policy remains intact, and his boss has threatened 100% tariffs against anyone who dares challenge a strong US dollar. No matter the threats from President Trump or the calming rhetoric from Secretary Bessent, the dollar is dancing to another tune, tumbling 10% in the first six months of this year, its worst performance since 1973. The administration is saying strong dollar, while the market is saying weak dollar. Hard to say who is going to win, but when the dollar falls, it will fall fast and hard, too fast for anyone other than lightning-fast professional traders to benefit from the fall. While a severe crack in the US dollar is probably still some time away, normal investors may want to start moving assets slowly out of the US. So, where should an investor go to lighten exposure to the US dollar? Where can they go? In a time of a declining US dollar, good opportunities can be found in high yielding emerging market bonds in countries like Mexico and Brazil. The yield pick-up versus the US dollar in both Mexico and Brazil will attract investment flows. An investor will not only get the higher interest rate, but currencies may rise in value due to strong demand from investors lightening up on US dollar exposure. Etherfuse’s Brazilian Tesouros and Mexican Cetes are good options for emerging market bond exposure. These tokenized assets not only generate a good yield and currency stability but can enhance other strategies on chain. Non yielding assets that offer a store of value like Bitcoin and gold are also good options, if the US dollar goes down. Lower interest rates and a lower currency are generally inflationary, and gold and bitcoin have proven to do well in times of inflation. There are certain US stocks that do well in a time of a falling US dollar, stocks that perform well are those with a high percentage of exports, because a weak dollar makes their products less expensive on the global market, which can support earnings. While this is true, given the extended valuation of the US stock markets, it doesn’t matter what the composition of sales outside the US is. All US stocks will go down together if the US dollar falls fast in value. Once again, this is not an emergency call. There is no need to throw US dollar assets out, but now is the time to slowly start making your way to the exit before the end of the game, encore, or curtain call. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    4 min

  8. 08/13/2025

    Brazil's Inflation, New and Improved

    For many years Brazil has had a bad reputation among international investors regarding inflation. It has always been high versus the rest of the world, and in the last ten years there was one-point when annual inflation was consistently 11 percent or more. There was a time in the last 30 years that annual inflation was 22%. Inflation in the 1990’s was so bad that people would rush to cash their paychecks before prices went up. For many years inflation defined Brazil. This is not the situation today. For July 2025, Brazil announced .26% monthly inflation, versus a consensus estimate of .37%. The annual inflation rate was 5.23%, which was down from the month before and better than consensus of 5.33%. These are good numbers. It is important to realize that these were the lowest annual inflation numbers in five months. The annual rate announced in January was 4.56%. The rate went as high as 5.53% in April, and then went down. Given US policy uncertainties since tariff announcement in April, it would not have been unreasonable to see inflation go above the high points of 5.53%. At first glance there are good reasons for inflation to go up, such as excessive government borrowing, but it did not. Inflation levels, both present and forward looking, are key for currency and bond yields. Higher inflation makes Brazilian goods more expensive, so investors will demand a quasi-discount on the currency. Regarding bonds, higher inflation leads to higher interest rates as investors require a high return to compensate for the risk of inflation eating away at the return. Brazil’s inflation success has shown itself in the currency which has appreciated 12% versus the US dollar year to date. Brazilian 52-week yields have gone from 15.48% at the beginning of the year to 14.57% now. It is possible that the US dollar’s value will decline in the months ahead on account of structural problems like excessive borrowings, and waning trust in policies and data. Any one of these issues can chisel away at confidence in the US dollar. Also, a Fed interest rate cut, which looks increasingly probable, will probably lower the price of the US dollar. So, in sum, Brazil is a country controlling inflation better than expectations, which seems to be expressing limited currency risk against the US dollar, and high interest rates on short-term sovereign debt. This is about as good as it gets. Put another way, fundamentals supporting the Brazilian Real are better than fundamentals supporting the US dollar. Investors working on-chain can take advantage of this situation by buying tokenized bonds that can be used for yield pick-up versus dollars, staking, or providing them to a pool. One possibility is Etherfuse’s Brazilian Tesouro which yields 13.9%, a yield that can be supercharged by supplying to a pool. This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit etherfuse.substack.com

    3 min
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The Market by Etherfuse provides subscribers with strategic insights into the global bond market, focusing on empowering individuals with insight into what is going on in the world of bonds, in a digestible format. etherfuse.substack.com

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