Crypto news

The market is entering a new phase, and signals from traditional finance look alarming for all risk assets, including Bitcoin. Two independent analytical observations point to a deep structural shift: excess liquidity in the global system is drying up, and the multi-year bull trend in the bond market appears to be over.

Liquidity has turned negative

A key indicator tracking "excess money" in the economy—the difference between money supply growth, inflation, and economic growth—has turned negative for the first time since 2021. This surplus has traditionally fueled stock markets and risky assets. Now it is gone. When this indicator falls below zero, capital typically flows from stocks into long-term bonds, and the yield curve flattens. Historically, this has foreshadowed a weakening of stock returns over the next 3–6 months.

It is important to understand: the current situation is not solely the result of a Fed decision. The market itself has been pricing in tightening throughout the year, and the regulator is essentially just catching up to its expectations. Meanwhile, retail investors continue to actively buy stocks—inflows into exchange-traded funds for U.S. stocks posted the second-largest weekly result in history. This means that the foundation supporting valuations is disappearing, and retail is entering precisely at the moment when this support has vanished.

The end of the 40-year bond cycle

At the same time, an even more fundamental process is unfolding. The yield on long-term U.S. bonds peaked at 14% in 1981 and steadily declined to zero by 2020. This 40-year downtrend created a unique environment where passive ownership of "the entire market" generated returns, and the ability to select assets did not matter. The COVID-19 pandemic became the point when the system flooded itself with liquidity, and it was then that the bond bull market quietly ended.

Now the trend has reversed. Valuation, balance sheet quality, and real cash flow are once again coming to the forefront. According to JPMorgan estimates, at current multiples, the yield of the S&P 500 index over a ten-year horizon could be near zero. This makes the market a rich field for active investors but kills the "buy and hold" strategy.

Risks and opportunities for Bitcoin

For Bitcoin, both signals primarily carry short-term risk. As an asset highly sensitive to liquidity, BTC could come under pressure alongside overvalued stocks. If liquidity continues to shrink and conditions tighten further, a correction could also affect cryptocurrency.

However, there is a flip side to the logic of the bond cycle reversal. If traditional "safe havens" lose their reliability and passive investing stops working, 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 a new era, but this will not happen immediately and is far from guaranteed.

My opinion: The market is entering a period where old patterns stop working. For Bitcoin, this means increased volatility and the need to reassess short-term expectations. However, it is precisely in such moments that the foundations for the next long-term trend are laid.