Speculation is often maligned as mere gambling, but it is a critical component for price discovery, liquidity, and risk transfer in any healthy financial market. Without speculators, markets would be inefficient. Prediction markets are an explicit tool to harness this power for accurate forecasting.

During a crisis, equity and loan portfolios can become completely illiquid. However, currency liquidity almost never disappears. Therefore, a deep capability in FX instruments is the most critical risk management tool for an EM investor, allowing them to hedge when other markets are closed.

For 99% of ETFs, liquidity and bid-ask spreads are not based on the ETF's own trading activity. Instead, they reflect the cost for a market maker to buy or sell the underlying basket of securities. An ETF holding liquid stocks can trade billions with tight spreads, even if the ETF itself is rarely traded.

Citing research from Verdad's Dan Rasmussen, the speaker notes that EM assets perform best when purchased during a crisis that originates in developed markets (e.g., the GFC or COVID). Panicked selling creates widespread mispricing in EM, even though the region is not the source of the crisis, offering a prime buying opportunity.

Before stress appears in repo markets or equity volatility, Bitcoin's price acts as a leading indicator. It is the "last functioning smoke alarm" for tightening global liquidity, making its price action a crucial, early signal for macro investors to monitor.

Unlike traditional markets with fixed hours, Bitcoin trades continuously, allowing it to react instantly to global news like the Japanese bond market sell-off, which occurred while US markets were closed. Its price action can serve as an early, real-time indicator for broader market sentiment and events.

Financial markets are likely to treat a potential government shutdown as temporary noise. Such events do not typically reprice the fundamental path of corporate earnings, inflation, or Federal Reserve policy, which remain the dominant drivers of asset performance. Investors will likely look past the disruption.

In today's hyper-financialized economy, central banks no longer need to actually buy assets to stop a crisis. The mere announcement of their willingness to act, like the Fed's 2020 corporate bond facility, is enough to restore market confidence as traders front-run the intervention.

After a two-week stock market shutdown during a previous conflict, a massive sell-off occurred. This was a liquidity event, not a reflection on fundamentals. Retail investors, who dominate the market, were locked out of their funds and sold at any price simply to access cash, creating a cascading effect.