Liquidity is drying up, the era of bonds is over: what this means for Bitcoin
The financial system is undergoing a tectonic shift, and ignoring it is no longer possible. Two independent analysts, whose conclusions I have carefully studied, point to fundamental changes that directly threaten the current market paradigm and, in particular, Bitcoin. This is not about a short-term correction, but about the end of an entire era.
The Disappearance of "Easy Money"
The first signal is a sharp reduction in excess liquidity within the financial system. An indicator that has traditionally fueled the growth of risky assets has turned negative for the first time since 2021. It is calculated simply: inflation and economic growth are subtracted from the growth rate of the money supply. The resulting remainder is the so-called "free money" that typically flows into stocks and cryptocurrencies. Currently, this remainder simply does not exist.
When this indicator turns negative, capital generally moves from stocks to bonds. The yield curve flattens, and historically this has foreshadowed a weakening of the stock market within the next 3-6 months. It is important to understand that this is not the result of actions by the new Fed chair—the market itself has been pricing in tightening for the past year. The regulator is merely catching up to reality.
The 40-Year Bond Bull Market is Over
The second, even deeper signal, is the end of the 40-year cycle of declining bond yields. Since 1981, when yields reached 14%, they have steadily fallen to zero in 2020. This trend, lasting nearly half a century, created a unique environment where passively owning the "entire market" generated profits, and the skill of selecting assets was unnecessary.
Now, this trend has reversed. We are entering an era where valuation, balance sheet quality, and real cash flow once again take center stage. Data from major banks confirms: at current valuations, the expected return of the S&P 500 over a ten-year horizon could be near zero. This makes the market an ideal field for the active investor, but a death sentence for passive "buy and hold" strategies.
My professional opinion: For Bitcoin, this situation creates a dual effect. In the short term, as the risk asset most sensitive to liquidity, BTC risks coming under serious pressure alongside overvalued stocks. However, in the long term, when traditional "safe havens" like bonds lose their appeal, a portion of capital will inevitably begin to seek alternatives. Bitcoin could become one of the beneficiaries of this new era, but the path to that will be thorny and unpredictable.