January 2026 in Crypto: Power Play

Make Geopolitics Great Again: A Strategic Pivot

One can say many things about Donald Trump, but one thing he certainly does is keep you on your toes, delivering the unexpected via his words and actions. At the start of the month he outdid himself when the US military conducted a surgically precise extraction operation of Venezuelan President Maduro and his wife, transporting them to New York to stand trial.

Many viewed the hour-long operation, conducted without loss of any American personal, as simply being about oil, given Venezuela has the largest proven oil reserves in the world (and in a form ideally suited for many US refineries). That is true to an extent, as evidenced by Trump stating that US companies will lead the effort to rebuild the crumbling infrastructure of Venezuela that has seen its share of crude oil supplies drop to little over 1%.

However, there is a very strong geopolitical angle to this as well. China has been a substantial importer of Venezuelan crude oil, purchasing an estimated 60%+ of its total production, oil that is was able to purchase at a substantial discount due to the western sanctions (ditto for the Russian and Iranian crude oil also purchased by China). The ability to purchase crude oil at below-market rates has been a significant benefit to the Chinese economy.

Ramping up the geopolitical tension, just days after the Maduro exfiltration, the US carried out an operation in the Atlantic seizing a Venezuelan-linked oil tanker, Marinera (formerly Bella-1). The supposedly empty oil tanker, which having turned away from the US blockade off the Venezuelan coast and re-registered its flag from Guyana to Russia, was being escorted by a Russian submarine. Despite this, the US military were able to secure the vessel, no doubt much to the chagrin of Putin¹.

Donroe 2.0: Objectives Of The Current US Administration

Such action caught many people off-guard, but perhaps it really shouldn’t because the actions of the Trump administration were entirely consistent with the updated US Nation Security Strategy published in November 2025.

The strategy, dubbed Donroe 2.0 (formally referred to in the document as the “Trump Corollary” to the Monroe Doctrine) makes clear the overriding objective of the current administration is to secure the US’s core vital national interests, something they believe was not the case for prior administrations (excluding Trump’s first term in office, naturally). In support of this objective the US seeks to restore “American preeminence in the Western Hemisphere” which in practical terms means “deny[ing] non-Hemispheric competitors [Ed. Note: read China and Russia] the ability to position forces or other threatening capabilities, or to own or control strategically vital assets, in our Hemisphere”. The strategy document also makes clear that the Trump administration are less confident in the abilities of its European allies to step up to the plate warning that…

“Should present trends continue, the continent will be unrecognizable in 20 years or less. As such, it is far from obvious whether certain European countries will have economies and militaries strong enough to remain reliable allies.”

Ouch! Little wonder that Team Trump chose not to rule out the possibility of using military force to take Greenland, a statement that sent shock waves around European political circles given it’s a former Danish colony meaning its both a member of the EU and NATO.

Going For Green… land

Trump’s desire to control Greenland—as not so subtly indicated by the AI generated images below posted on Trump’s social media account—is not only driven by national security concerns arising from the desire to ensure preeminence in the Western Hemisphere (as per Donroe 2.0), it also reflects the value the country has for strategic, economic and geopolitical reasons.

Top Trump Trolling

Source: Truth Social (via Donald Trump)

Greenland has considerable mineral resources, but also it provides a strategic foothold in the Arctic – a region with vast untapped oil, gas, critical minerals (like rare earths for tech) that could become extractable in a warming climate. Moreover, sitting between North America and Europe, the shortest, “great circle” routes for missiles traveling between Russia (and potentially China) and the US pass over the Arctic and Greenland. This makes it optimally positioned to detect and track these potential threats, providing critical early warning time for North American Aerospace Defense Command (NORAD), which is why the US operates the Pituffik Space Base (formerly Thule Air Base) in the north west of the country – see image.

“Great Circle” Missile Routes

Source: Wall Street Journal

As we have noted in previous research notes, President Trump views himself as king of the deal and takes great pride in coming out on top in any negotiation. Hence, it is was perfectly plausible that by choosing not to rule out using military force to annex Greenland, he was engaging in an “extreme opening” strategy: making a high opening bid and then negotiating down to something both sides consider a more acceptable compromise (a strategy that has been denigrated as TACO “Trump Always Chickens Out”). However, one can never be sure when it comes to Trump, especially as securing control of Greenland fits perfectly with the recently updated National Security strategy.

Existential NATO Risk

What is certain though is such an outcome would mean the end of NATO. NATO’s Article 5 collective defense guarantee states that an attack on one member is an attack on all, and if triggered, other members are obliged to take such action as deemed necessary to restore security (including the use of armed force). Hence, if the US decided to use military force to take control of Greenland theoretically European nation states would be obligated to attempt to repel them militarily even though they have next to zero chance of success given the US is far and away the most powerful NATO member. This would be the death knell for an alliance supposedly based on shared common values about democracy and the rule of law and which has provided the basis for enduring peace among the world’s leading nations since 1945.

Tariff Threats Return

Given the huge geopolitical ramifications of putting US boots on the ground, Team Trump instead resorted to a tried-and-tested way of pressuring the Denmark – and the broader EU- into relinquishing control of Greenland: tariffs. On January 17, Trump took to social media posting that an additional 10% import tariffs – effective from February 1 – would be applied to goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain, until the US is permitted to buy Greenland. From June 1, the tariffs would be further raised to 25%, with yet additional increases threatened until a deal is reached. Rather unsurprisingly, European political leaders condemned the tariff threat, warning that it threatened to undermine transatlantic relations. It also did nothing good for risk assets, including cryptocurrencies, which sold off in response.

However, Trump’s hard ball negotiating strategy appeared to once again pay off as on the periphery of the WEF meeting in Davos he reached a deal with the NATO head Mark Rutte over Greenland. According to media reports, the “framework for a future deal” involved military and mineral development cooperation, with the US given sovereignty over territory where the military bases are located. While asset markets – both tradfi and digital – celebrated the news that the threat of additional US tariffs on eight European countries had been rescinded, with Denmark and Greenland both not taking part in the negotiations it remains unclear whether the proposal will be ratified given they has repeatedly held the position that state sovereignty is non-negotiable. This lingering uncertainty tempered the bullish impact of the news.

What makes Trump’s negotiating strategy even more impressive, is that it was far from certain he would have been able to go through with his tariff threat because the US Supreme Court has yet to rule on whether the earlier import tariffs imposed by the administration were legal on the basis that emergency powers were improperly invoked. Be that as it may, what is clear is that by their actions, the Trump administration is resetting the global world order for the first time in seventy years, shifting from rules-based to power-based. President Trump made this plain, during this speech at Davos, when he said…

“Every NATO ally has an obligation to be able to defend their own territory. And the fact is, no nation or group of nations is in any position to be able to secure Greenland other than the United States. We’re a great power, much greater than people even understand. I think they found that out two weeks ago in Venezuela.”

One should not underestimate the substantial ramifications that flow from such a strategic pivot by the world’s largest and most powerful nation. It will cut across many different areas, including digital assets.

New World Order: From Rules To Power

The financial bedrock of the post-war rules-based system was the creation of Bretton Woods, a system of fixed exchange rates pegged to the USD that was convertible into gold. Its aim was to ensure international financial stability and prevent the competitive devaluations that occurred in the 1930s as countries sought to extricate themselves from the Great Depression. This system established the US dollar’s dominance as the global reserve currency, status that persisted even after the Nixon administration closed the gold window in 1971, effectively ending the US dollar’s convertibility into the yellow metal.

For over fifty years, this fully fiat international monetary system prevailed but over recent years cracks have started to appear.

Since the Great Recession, and accelerated by the Covid-19 pandemic, fiscal profligacy has emerged as a defining feature of many developed economies. Public debt has soared to unprecedented peacetime levels, fueled in part by central banks’ expansive monetary policies, prompting many asset owners and managers to question its long-term sustainability.

Given the solvency of the fiscal authority is what backs the value of money in a fiat system, this necessarily means that investors have increasing scepticism about the ability of the US to maintain the purchasing power of the US dollar’s lent to it by the rest of the world (the corollary to its sustained current account deficits).

Simply looking at exchange rates does not fully revealed the extent of this increasing distrust because the widespread nature of fiscal incontinence means most other fiat currencies have also experienced the same loss of faith by international reserve holders. Where it is revealed though is in the marked acceleration in holdings of gold as a percentage of official reserve assets – a trend we have previously alluded to. Ray Dalio in a recent post on X neatly demonstrated this point when he noted the following returns in 2025:

What happened the value of money in 2025?

Source: X

The US-led response to Russia’s invasion of Ukraine, which including freezing the Russian central bank’s foreign exchange reserve, and the weaponization of the Swift settlement system by excluding Russian financial companies, has further served to accelerate this exodus out of the US dollar.

Distrust On The Rise

Global trade flows must continue unless the world is willing to accept a severe decline in living standards, and these flows require financing. In a world where nation-states share a degree of trust, grounded in aligned economic interests, the fiat money system operates efficiently. However, recent events reveal that nation states now exhibit far less mutual trust— even between former allies, as Europe is discovering.

A global order shifting from “rules-based” to “power-based” is likely to lead to a more fragmented and volatile financial landscape, where Bitcoin’s role as a decentralized, non-sovereign asset becomes more prominent.

As noted above, official reserve holders have been displacing the share of fiat money denominated assets in favour of the yellow metal, but gold is far from ideal for supporting international payments. To be certain one has unfettered access to it, the gold held in reserves must be self-custodied, meaning it must be held within one’s geographic borders (something Venezuela ironically found out the hard way a few years back). From this it follows that for gold to support global trade, regular international shipments of this heavy metal will be required². However, international shipping of gold is expensive even when geopolitical tension and the risk of military intervention is low, which is not currently the case. By contrast, its digital equivalent, Bitcoin, is far superior given it can be transported around the global and settled, in size, in little over an hour.

Moreover, there are already quite sizable nation-state holdings of Bitcoin (the top three countries are the US, China and the UK), which could be readily deployed in support of global trade financing. One notable exception is Europe. Due to longstanding opposition to privately-issued cryptocurrencies-as recently demonstrated by Banque de France Governor François Villeroy de Galhau at last month’s meeting in Davos-the region has very modest holdings of Bitcoin³. (NB: Given the continent also has very little domestic fossil fuel supplies and – France aside – little in the way of nuclear power generation, it is increasingly reliant on intermittent renewable electricity generation. Combined with a lack of rare earth deposits, its a region that appears to be very badly positioned for the emerging world order).

Political Pressure On The Fed

At the same time as seeking to upend the international geopolitical landscape, the Trump administration is also challenging one on the cornerstones of modern macro policy making at home by ramping up political pressure on the Fed – a development that runs contrary to the prevailing economic wisdom that monetary policy is optimally served by having an operationally independent central bank.

In a stunning development on January 11, Chair Jerome Powell released a video message stating that the Department of Justice had served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to his testimony before the Senate Banking Committee last June. While that testimony partly addressed a multi-year project to renovate historic Federal Reserve office buildings, Powell said the threat was unrelated to the renovation itself. Instead, he framed it as a challenge to the Fed’s independence: “whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.” This marks the most serious clash between the Federal Reserve and the US government since 1951, when central bankers secured an agreement to separate government debt management from monetary policy, formalized in the Fed–Treasury Accord.

Underlining the seriousness of the situation, just two days after Powell’s statement was released the heads of 11 central banks (including the ECB, the BoE, the SNB and the BIS) issued a statement expressing their full solidarity for the Fed and Chair Powell, stating that “the independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens we serve”. The return of such overt political pressure being applied to the Fed should be seen as another step toward fiscal dominance—a highly bullish environment for finite-supply assets such as gold and its digital equivalents.

This conclusion holds even after Trump’s surprise nomination of Kevin Warsh to succeed Jerome Powell. Warsh, who served on the Fed’s Board of Governors from 2006 to 2011, is widely viewed as an inflation hawk and a longstanding critic of quantitative easing. As a result, news of his nomination initially sparked an unwinding of the debasement trade: both digital and analogue gold sold off sharply, while silver plunged. More recently, however, Warsh has criticized Powell for being insufficiently willing to cut interest rates and has gone so far as to describe the Fed as “broken,” rhetoric that closely mirrors Trump’s own. Consequently, while Warsh is seen as a “safe pair of hands” — a perception likely to smooth his confirmation — it is highly unlikely that Trump would nominate a Fed chair who is not broadly aligned with his economic objectives.

A Madding World

One interpretation of Trump’s recent actions, especially popular in left-leaning circles, is that he has simply “lost the plot” and no one in the administration is prepared to stand up to him. This is extremely unlikely in my opinion. Given his penchant for creating uncertainty in order to secure the best possible deal, it is plausible that he is engaging in constructive ambiguity, but I suspect it goes even deeper than that.

Many of the forces currently in play (economic and geopolitical) were set motion a long time ago. The inability of the US government to engage in fiscal consolidation to ensure the sustainability of its debt load was always going to lead to increased political pressure on the central bank, ultimately resulting in the erosion of its independence (a theme I first pointed out over a decade ago). Moreover, increased international tension (and a rising probability of war) when an emerging super power threatens to displace the current super power, which is a very apt description of the dynamics between China and the US, has long been recognized and is known as Thucydides Trap. Hence, it appears to me that there is a certain inevitability to what the US administration is doing and, if not Trump, someone like him would have come to the fore at some point.

Gold Bulls 1: Bitcoin Bulls 0

Gold (and silver) prices last month surged to new record highs, a move entirely consistent with the shifting macro landscape. To the disappointment of crypto bulls, Bitcoin and other finite supply tokens have instead been trading flat to down. This is surprising and has got a lot of people in the crypto world questioning what is going on? Is the digital gold narrative for crypto (and particularly Bitcoin) wrong, or it is just a question of timing?

Part of the explanation could be that during times of such heightened uncertainty such as now, the mindset of investors is Safety First. This naturally favours gold because it fits existing mandates and can be justified in one sentence to an investment committee. Hence allocating to gold carries little to no career risk. By contrast, Bitcoin is also still widely viewed as a risk-on, speculative asset meaning it trades like a technology rather than a clean monetary asset. Furthermore, it remains hard to integrate into official reserve frameworks and is also still fairly modest in terms of its overall market cap (a problem that is overcome via higher prices, ironically). This makes Bitcoin more sensitive to marginal capital flows, leading to higher price volatility, which makes position sizing difficult. For instance, a 5-10% allocation to gold can be held without dominating a portfolio’s overall risk metrics, whereas Bitcoin often cannot exceed 1-2%.

Another factor, as outlined in our 2026 Crypto Outlook, that could be holding back Bitcoin, specifically but crypto more generally given it tends to be the trend trailblazer, is increasing concern about the impact of quantum computing, which it is estimated would leave 20-50% of the circulating supply of Bitcoin vulnerable to attack. Despite this being a low probability near-term risk, it’s clearly a high impact event, hence the sensitivity among a growing number of digital asset investors. Physical (self-custodied) gold – that is to say, not paper gold issued by ETFs – is impervious to quantum attacks and hence this may, on the margin, also be a factor hindering Bitcoin.

Conviction Not Concern

Equally, it plausible that crypto is simply lagging precious metals because it is widely recognized that capital allocations do not move in parallel, rather they tend to move in sequence. The Safety First rationale outlined above means gold is an earlier mover, but once the macro clouds clear and there is greater certainty about the economic/political landscape, investors are likely to deploy higher beta asymmetric hedges, which favours digital assets – that is to say, Bitcoin moves on conviction not concern.

Indeed, historically if we look at gold versus Bitcoin, the former tends to follow the latter with a lag of several months and on previous occasions when gold has taken off and significantly outperformed Bitcoin, it has been followed by a bullish move in the crypto space once investors become more confident in the environment – see image.

Bitcoin/Gold Ratio versus Gold Price

Source: TradingView

The green line in the chart above shows the Bitcoin/Gold ratio (rising means Bitcoin outperformance versus gold and vice versa), the thicker blue line shows the gold price in absolute terms, while the thinner blue line in the lower chart shows the annual percentage change in the gold price. On the three previous occasions when the price of gold has risen significantly over the preceding 12 months, the Bitcoin/Gold ratio subsequently surges, implying Bitcoin outperformance versus the yellow metal. Given the stellar rise in the gold price seen over the past year, if this historic pattern of capital rotation persists, Bitcoin – and by extension most large cap digital tokens – could be poised for a serious move higher.

USD Stablecoins: Not A Silver Bullet

At this point it is also worth mentioning that the Trump administration clearly views on-chain US dollars ie, a fiat-backed stablecoin as a key mechanism for ensuring the US dollar remains the premier reserve currency of the world, and for good reasons.

By requiring USD stablecoins to be fully backed by either US cash deposits or Treasury bills (as defined within last year’s GENIUS Act) the administration have a strong incentive for the supply of USD stablecoins to flourish because it would help to finance the US federal deficit, which has become increasingly reliant on short-term paper issuance.

Such tokens can, theoretically be held anonymously because once issued they become tradable in the secondary market, including offshore. However, as we have seen with the likes of Tether, the US government would still be able to blacklist wallets – effectively taking the USD stablecoins out of circulation – if the authorities deem that the wallet holder has done something illegal or even just contrary to their wishes.

Moreover, USD stablecoins will not stop the erosion of purchasing power, ie the debasement trade because issuers are not permitted to pay interest. Hence, even if, as seems highly probable, the Trump administration actively encourages adoption, especially internationally, of USD stablecoins, this in no way invalidates the perception that the emerging new world order is one conducive to privately-issued finite-supply money that can be shielded from the governments (US or otherwise). Bitcoin is, of course, a classic example, but it likely applies to other privacy-first cryptocurrencies. Perhaps, that is a good chunk of the reason why they were the top performing segment of the crypto market in 2025.

2026: Starting With A Bang

This was a longer Monthly Update than usual, but with good reason. Last month was clear validation of Lenin’s famous quote “There are decades where nothing happens; and there are weeks where decades happen”.

The Trump administration is in the early phase of rolling out their new national security strategy, one that has profound geopolitical and macro economic consequences because it represents a transition to a new world order, one no longer based on rules but power.

It will take investors time to think through the consequences of this regime shift and calibrate their portfolios accordingly. Near-term uncertainty has been a boost for gold, but over time it will also serve to reinforce the crypto bull-run (definitely ending the four-year crypto cycle narrative) because the emerging environment is one that Bitcoin is ideally suited being as it is a geographically, finite supplied trust-minimized form of electronic store of value.

1 A second Venezuela-linked oil tanker was seized the same day close to the Caribbean sea underscoring the effectiveness of the US military in conducting such operations.

2 There was evidence of such flows last year, with US gold exports increasing significantly over the past couple of quarters (Q3 2025 being the last available data)

3 In 2024 Germany decided to sell its holdings of seized Bitcoin at prices around 50% below current levels rather than convert it into a strategic reserve as the US chose to do last year.