Liquidity is drying up, the era of bonds is behind us: what this means for Bitcoin
The financial system is entering a phase of tectonic shifts. Two independent analysts, whose conclusions I find extremely compelling, point to a deep structural shift that could fundamentally change the rules of the game for all asset classes, including Bitcoin.
No More Money: The Bull Theory Signal
According to calculations by the analytical platform Bull Theory, the excess liquidity indicator in the financial system has turned negative for the first time since 2021. This indicator is calculated as the difference between the growth rate of the money supply, inflation, and economic growth. It is this "residual" that has traditionally fueled stock market growth. Now it has disappeared.
When excess liquidity turns negative, capital typically flows from stocks into long-term bonds. The yield curve flattens, and historically this has foreshadowed a weakening of stock returns over the next 3–6 months. Notably, according to the analyst, the new Fed Chair Kevin Warsh is not the root cause here — 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 currently expensive relative to bonds in a way that has only occurred in the rarest moments over the past half-century — the current level has been observed in only 5% of cases. Retail investors, nevertheless, continue to actively buy stocks: US stock exchange-traded funds saw the second-largest weekly inflow in history. This creates a paradox: the money that usually supported prices is disappearing, while retail is entering exactly when that support has vanished.
The 40-Year Bond Bull Market is Over: Thierry Borje's View
Another perspective is offered by Thierry Borje. In his view, the main event is not happening with AI or cryptocurrencies, but with bonds, which lie in almost every "safe" portfolio. He reminds us: in 1981, bond yields reached 14%, and by 2020 they had fallen to 0%. This was 39 years of falling rates, and they ended at the moment of panic due to the COVID-19 pandemic. At that time, the system "flooded" itself with liquidity, and the forty-year bond bull market quietly ended precisely when everyone felt saved.
Borje emphasizes: this reversal is not the end of the game, but the beginning of a much more interesting era. For forty years, falling rates lifted all assets together, and passive ownership of "the whole market" beat the skill of selection. Now that the trend has reversed, valuation, balance sheet quality, and real cash flow are once again coming to the forefront. He cites JPMorgan data: at current valuations, the annual return of the S&P 500 index could be around zero over a ten-year horizon.
What Does This Mean for Bitcoin?
For Bitcoin, both signals primarily carry short-term risk. If liquidity dries up and conditions tighten, Bitcoin, as a liquidity-sensitive risk asset, risks coming under pressure alongside overvalued stocks.
However, in Borje's logic, there is also a flip side: if the old model of "buy the index and hold" 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, although this will not happen immediately and is far from guaranteed.
Expert opinion: The transition from an era of cheap money and passive investing to a period of active management and liquidity scarcity is a stress test for all risk assets. Bitcoin, despite its unique nature, remains part of the global liquidity cycle for now. Its ability to become "digital gold" will be tested precisely in conditions where traditional safety nets stop working. In the coming quarters, volatility could be extreme, but it is precisely in such moments that new market structures are born.