Liquidity is drying up, the era of bonds is over: what this means for bitcoin
The financial system is undergoing a fundamental shift that could radically change the rules of the game for all investors, including bitcoin holders. Two independent analytical signals indicate that the old paradigm, based on an abundance of cheap money and a multi-year trend of falling rates, is coming to an end.
Excess liquidity has turned negative
My analysis shows that the indicator of excess liquidity in the financial system — the difference between money supply growth, inflation, and economic growth — has turned negative for the first time since 2021. It is this "residual" that has traditionally fueled the growth of stock markets and risky assets. Now it is gone.
Historically, when this indicator goes negative, capital begins to flow from stocks into long-term bonds. The yield curve flattens, and this foreshadows a weakening of the stock market over the next 3–6 months. It is important to understand: the current actions of the Fed are not the root cause. The market itself has been pricing in tighter conditions throughout the year, and the regulator is merely "catching up."
The situation is exacerbated by extreme overvaluation. Stocks are currently expensive relative to bonds in a way that has only occurred in 5% of cases over the past half-century. Meanwhile, retail investors, seemingly oblivious to the signals, continue to actively buy stocks — inflows into US funds are hitting historic records. This is a classic scenario where the crowd enters the market precisely at the moment when its fundamental support — liquidity — disappears.
The end of the 40-year bond bull market
The second, even deeper line of analysis concerns the debt market. While attention is focused on AI and cryptocurrencies, the main event is unfolding with bonds — the asset that underpins virtually every "safe" portfolio.
Since 1981, the yield on long-term US bonds has fallen from 14% to nearly zero in 2020. This was a 39-year bull market that quietly ended during the pandemic panic, when the system "flooded" itself with liquidity. Now the trend has reversed. This is not the end of the game, but the beginning of a much more interesting era. Fundamental factors come to the forefront: business valuation, balance sheet quality, and real cash flow.
Estimates suggest that at current multiples, the return on the S&P 500 index over the next decade could trend toward zero. This turns the market into a rich field for active investors who know how to pick, rather than simply buying "the whole market."
Risk and opportunity for bitcoin
For bitcoin, both of these signals primarily carry short-term risk. As a liquidity-sensitive risky asset, it could come under pressure alongside overvalued stocks if the cash flow dries up.
However, in the long term, there is also a flip side. If the old model of "buy the index and hold" stops working, and safe bonds lose their status as a safe haven, some capital may begin to seek alternatives outside traditional markets. In such a scenario, bitcoin could compete for the role of one of the assets of the new era. But this will not happen immediately and is far from guaranteed.
Expert opinion: The market is currently at a bifurcation point. The disappearance of excess liquidity is not a temporary correction, but a structural shift. For bitcoin, this means that the period of "easy money" that lifted all assets is over. Only those who can prove their value in a tight monetary regime will survive and grow.