Crypto news

The financial system is undergoing a structural shift that could fundamentally change the rules of the game for all risk assets, including Bitcoin. Two independent analytical signals indicate that the era of cheap money and falling interest rates has definitively ended, replaced by a period of harsh selection and liquidity scarcity.

The first warning sign comes from the analytical platform Bull Theory. Its excess liquidity indicator, calculated as the difference between money supply growth, inflation, and economic growth, has turned negative for the first time since 2021. This means the "surplus" that traditionally fueled the stock market is gone. Historically, when this indicator falls below zero, money begins to flow from stocks into long-term bonds, and the yield curve flattens. This is typically followed by a weakening of stock returns over the next 3–6 months. Notably, analysts believe that the new Fed Chairman Kevin Warsh is not the initiator of this shift—the market itself has been pricing in tightening all year, and the regulator is merely "catching up."

Against this backdrop, the overheating of valuations looks particularly threatening. Stocks are currently expensive relative to bonds in a way that has only occurred in 5% of cases over the past half-century. The irony of the situation is that retail investors, seemingly oblivious to the disappearance of the liquidity cushion, continue to actively buy stocks, recording the second-largest weekly inflow into US stock exchange-traded funds. They are entering precisely at the moment when the fundamental support for the market has evaporated.

The End of a 40-Year Trend: Thierry Borge's Perspective

A second, even deeper angle is offered by analyst Thierry Borge. He argues that the main event is not happening with stocks or cryptocurrencies, but with bonds—the asset underlying virtually every "conservative" portfolio. Borge reminds us that in 1981, bond yields reached 14%, and by 2020, they had fallen to 0%. These 39 years of continuous rate declines created a unique era where passively owning "the entire market" led to victory. This trend ended during the pandemic panic, when the system flooded itself with liquidity, and the 40-year bond bull market quietly died just as everyone felt saved.

According to Borge, this reversal is not the end of the game, but a new, much more interesting beginning. Now, valuation, balance sheet quality, and real cash flow come to the forefront. He cites JPMorgan data, according to which, at current valuations, the S&P 500 index's return over a ten-year horizon could be near zero. This makes the market a "rich field for the active investor."

What Does This Mean for Bitcoin?

For Bitcoin, both signals primarily carry short-term risk. As a liquidity-sensitive risk asset, BTC risks coming under pressure alongside overvalued stocks if conditions continue to tighten and liquidity continues to dry up.

However, there is a flip side to Borge's logic: if the old "buy and hold the index" model stops working, and traditionally "safe" bonds lose their status as a safe haven, some capital may eventually begin to seek alternatives outside traditional markets. In such a scenario, Bitcoin could compete for a role as one of the assets of the new era, though this will not happen immediately and is far from guaranteed.

My professional opinion: We are witnessing a classic moment of paradigm shift, where old correlations are breaking down. For Bitcoin, this means that in the coming months, it may be more vulnerable to macroeconomic pressure than many expect. But it is precisely during such periods of reassessment that new long-term opportunities are born for those who understand the fundamental shifts.