The financial system at zero: what the end of the bond era means for bitcoin
Two leading analysts independently observe a fundamental shift in the global financial system. Bull Theory warns that excess liquidity in the markets has turned negative for the first time since 2021. Thierry Borget, in turn, declares the end of the 40-year bond bull market. Both experts agree on one thing — the familiar era for investors has come to an end, creating new risks, including for Bitcoin.
These views complement each other organically. Bull Theory focuses on the immediate threat: the disappearance of liquidity that traditionally fueled the growth of risky assets. Borget looks at the long-term reversal that changes the very rules of the game in capital markets.
Liquidity Dries Up: A Signal for Risky Assets
As my calculations show, the excess liquidity indicator in the U.S. financial system has turned negative for the first time since 2021. This indicator is calculated as the growth rate of the money supply minus inflation and economic growth. It is this surplus that typically flows into stocks, bonds, and, of course, cryptocurrencies. Currently, it simply does not exist.
When the indicator turns negative, money typically moves from stocks into long-term bonds. The yield curve flattens — historically, this has preceded a weakening of stock returns over the next 3–6 months. It is important to note: in my opinion, the new Fed Chair Kevin Warsh is not creating this shift. The market has been pricing in tightening for the past year, and the regulator is merely catching up.
Overheated valuations amplify the concern. Stocks are currently expensive relative to bonds in a way that has only occurred in the rarest moments over the past half-century — the indicator has only been above current levels in 5% of cases. Against this backdrop, retail investors continue to actively buy stocks: U.S. equity exchange-traded funds saw the second-largest weekly inflow in history. Essentially, the foundation that supported prices is disappearing, and retail investors are entering precisely when this support has vanished.
The 40-Year Bond Bull Market Is Over
Thierry Borget offers a different perspective. In his view, everyone is looking at the wrong bubble: while the crowd debates AI and cryptocurrencies, the main event is unfolding with bonds, which lie in almost every "safe" portfolio.
Borget reminds us: in 1981, bond yields reached 14%, and by 2020, they had fallen to 0%. This was 39 years of declining rates, ending 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.
According to him, this reversal is not the end of the game, but the beginning of a much more interesting one. Forty years of falling rates lifted all assets together, and passive ownership of "the entire market" beat the skill of selection. Now that the trend has reversed, valuation, balance sheet quality, and real cash flow are coming to the forefront again. 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, which, in his opinion, makes the market a rich field for the active investor.
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 risky asset, risks coming under pressure alongside overvalued stocks.
However, there is a flip side to Borget's logic: 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 the role of one of the assets of the new era, although this will not happen immediately and is far from guaranteed.
My expert conclusion: we are on the verge of a paradigm shift where passive investing loses its magic. For Bitcoin, this means increased volatility and short-term risks, but in the long term — a potential transformation into a new type of safe-haven asset. The main thing now is not to confuse the end of one era with the end of the game.