Liquidity is drying up, the era of bonds is over: what does this mean for Bitcoin
Financial markets are on the verge of a tectonic shift. Two independent analysts, whose conclusions complement each other, point to a fundamental change in the structure of global liquidity and the end of a 40-year bull cycle in the bond market. For investors, especially those holding risky assets like bitcoin, this is a high-alert signal.
No More Money: The Bull Theory Indicator Turns Negative
The first signal comes from the analytical platform Bull Theory. Its indicator of excess liquidity in the financial system 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. This residual has traditionally fueled stock market growth. Now, this "fuel" is simply gone.
Historically, when the indicator goes negative, capital begins to flow from stocks into long-term bonds. The yield curve flattens, and this almost always foreshadows a weakening of the stock market within the next 3-6 months. Notably, according to the analyst, the new Fed Chair Kevin Warsh is not the root cause of this shift — the market itself has been pricing in tightening all year, and the regulator is merely "catching up."
The situation is exacerbated by overheated valuations. Stocks are now as expensive relative to bonds as they have been in the last half-century — the current level of premium has only been seen in 5% of cases. Ironically, retail investors, ignoring the signals, continue to actively buy stocks: inflows into US stock exchange-traded funds posted the second-largest weekly result in history. It turns out that the support that held up prices is disappearing just as retail enters the market.
Borget: The 40-Year Bull Market in Bonds is Over
A second, deeper perspective is offered by analyst Thierry Borget. He believes the main event is not happening with AI or cryptocurrencies, but with bonds — the asset that underpins almost every "conservative" portfolio.
Borget reminds us: in 1981, bond yields reached 14%, and by 2020 they had fallen to nearly zero. These 39 years of declining rates created a unique era where passive ownership of "the whole market" beat active selection. The COVID-19 pandemic became the point where the system "flooded" itself with liquidity, and the 40-year bull market in bonds quietly ended just when everyone felt saved.
Now, in his view, the trend has reversed. Valuation, balance sheet quality, and real cash flow are once again coming to the forefront. Borget cites JPMorgan data: at current valuations, the annual return of the S&P 500 index could be around zero over a ten-year horizon. This makes the market a rich field for the active investor, but destroys the "buy and hold" model.
Conclusion for Bitcoin: Double Blow and a New Chance
For bitcoin, both signals primarily carry short-term risk. If liquidity dries up and conditions tighten, BTC, as a liquidity-sensitive risky asset, risks coming under pressure alongside overvalued stocks. This is a classic correction scenario.
However, in Borget's logic, there is also a flip side. If the old "buy the index and hold" model stops working, and traditionally safe bonds lose their status as a safe haven, some capital may eventually seek alternatives outside traditional markets. In such a scenario, bitcoin could compete for a role as one of the assets of a new era — but this will not happen immediately and is far from guaranteed.
Expert Opinion: The market is entering a phase where money is no longer "free." For bitcoin, this means its "digital gold" narrative will be tested for strength under conditions of real liquidity scarcity. Only those assets that can prove their value not in words, but on the balance sheet, will survive.