Bitcoin Breaks All-Time High: Why Trump’s Tax Cuts Could Trigger a Market Rally

Today's market is more chaotic than ever. No one can say with confidence where it is heading. Noise overwhelms signal, and narratives conflict. Following Moody’s downgrade of the U.S. credit rating, a series of announcements and market reactions have only added to the confusion. The downgrade, after all, was due to one thing: debt. And yet, the U.S. is preparing to expand that very debt—through Trump’s much-touted tax cut proposal, famously dubbed “one big, beautiful bill.”

Tax cuts are inherently stimulative. But this one lacks funding. It means more Treasury issuance, which could lead to higher yields and dollar weakness. Indeed, markets responded quickly: the 10-year U.S. Treasury yield surged past 4.6%. Most investors saw this tax cut as reckless—how could the U.S. issue more debt right after a credit downgrade?

But K3 Lab takes a contrarian view. We believe this tax cut, far from being a negative, could actually be a powerful short-term tailwind for asset markets. Here's why.

First, tax cuts increase the attractiveness of U.S. assets. Higher corporate earnings lead to higher stock prices. And rising stock markets inevitably pull in capital. Amid this, Google’s new AI leap further strengthens the appeal of U.S.-centric investments. With American equities climbing and no clear alternatives elsewhere, it's hard for global capital to stay on the sidelines. Like it or not, the money is moving toward the U.S.—and so is strength in the dollar.

A stronger dollar suppresses import prices and tempers inflation. Thus, what looks like a potentially inflationary tax cut becomes manageable under dollar strength. What emerges is a market environment characterized by rising equities, a strong dollar, and moderating inflation—a Goldilocks scenario. And crucially, financial markets always react faster than the real economy. While the effects of tax cuts will take time to show on Main Street, Wall Street is already pricing them in. Capital flows now, not later. The clearest indicator of this dynamic is Bitcoin. As the asset most sensitive to liquidity, Bitcoin hit a new all-time high yesterday. This signals that liquidity is flooding into dollar-denominated assets—Bitcoin being one of the purest forms—and serves as a powerful reflection of the current market environment.

From a monetary policy perspective, this creates a new dynamic. A tax cut could lead to stronger growth expectations, which—paired with a stronger dollar—creates downward pressure on inflation expectations. This means that even without a Fed rate cut, market sentiment could shift toward lower yields. That would help stabilize the Treasury market—ironically, the same one that most assumed would collapse under deficit pressure.

In short, we now see a plausible narrative for a short-term bull market. But here’s the real point: this is a distorted equilibrium. It will not last.

Structurally, the U.S. cannot sustain this level of fiscal expansion. The debt load is already unsustainable, and any growth bump from tax cuts will come at the cost of future stability. The end of tariff reprieves could also reintroduce import-driven inflation. The trade war could easily return, with July 8 looming as a potential D-day. Japan is flashing warning signs too: its 10-year government bond yield just passed 1.55%—a two-decade high. Europe is facing yield spikes, and South Korea isn’t faring much better. As global bond markets wobble, the U.S. equity rally stands increasingly isolated.

The market isn't ignorant—it’s willfully ignoring reality. Greed is driving this rally. And those making money in this illusory zone must be prepared to pay the price later. History offers a precedent: Reagan’s tax cuts also led to a short-lived boom, strong dollar, surging yields, and ultimately a market breakdown. This time, the aftermath may be even more severe.

Now is the time to realize gains and build cash. Investors should prepare for what comes after the party. Tax cuts may offer short-term opportunity—but they are long-term poison. The era of cash is quietly approaching. In this phase, the smartest move is not to chase speed, but to position for reversal.