The end of the "cheap" money era: why bitcoin has come under pressure along with stocks
The financial system is undergoing a fundamental shift that directly threatens Bitcoin's current position. In my observation, we are entering a phase where the usual growth drivers — excess liquidity and falling rates — are disappearing. Two key signals indicate that the old investment paradigm is crumbling right now.
Liquidity has turned negative for the first time since 2021. An analytical indicator, calculated as the difference between the growth rate of the money supply, inflation, and economic growth, has turned negative for the first time in three years. It is this "residual" that typically fueled the stock market, flowing into equities. Now it is simply absent. When the indicator goes negative, capital generally begins to shift from stocks to long-term bonds, which historically foreshadowed a weakening of risk asset returns over the next 3–6 months. Notably, the market has been pricing in tightening all year, and the Fed is merely catching up. Against this backdrop, stocks appear extremely expensive relative to bonds — the current level of overvaluation has been observed only 5% of the time over the past half-century. Retail investors, however, continue to buy stocks, setting record inflows into ETFs, precisely at the moment when the fundamental support for growth disappears.
The 40-year bond cycle is over
While the crowd's attention is fixed on AI and cryptocurrencies, the major tectonic event is unfolding in the bond market. The yield on long-term US Treasuries peaked at 14% in 1981 and steadily declined to 0% by 2020. This 39-year downward trend, which lifted all assets indiscriminately, ended during the pandemic panic when the system was flooded with liquidity. Now the trend has reversed. This is not the end of the game, but the beginning of a new era where passive ownership of "the entire market" no longer works. Valuation, balance sheet quality, and real cash flow come to the forefront. Estimates suggest that at current multiples, the S&P 500's return over a ten-year horizon could trend toward zero, making the market an ideal field for the active investor.
What does this mean for Bitcoin? In the short term — direct risk. Bitcoin, as a risk asset highly sensitive to liquidity, risks coming under pressure alongside overvalued stocks. However, in the long-term logic, there is a flip side: if the old "buy and hold" model stops working and bonds lose their "safe haven" status, some capital may begin to seek alternatives outside traditional markets. In this scenario, Bitcoin could compete for a role as one of the assets of the new era, but this will not happen immediately and is far from guaranteed.
My verdict: The market is passing through a bifurcation point. Bitcoin stands at a crossroads: a short-term pullback due to liquidity compression is inevitable, but it is precisely such "bloodbath" periods that often lay the foundation for the next bull cycle, if the asset can prove its value as a store of value in a new, tighter monetary reality.