The end of the "cheap money" era: what awaits Bitcoin in the new reality
Financial markets are experiencing a fundamental shift that could radically change the rules of the game for all investors, including Bitcoin holders. Two independent analytical signals indicate that the familiar era of abundant liquidity and risk-free bond growth is coming to an end.
The first warning sign comes from the analytical platform Bull Theory. Its indicator of excess liquidity in the financial system, calculated as the difference between money supply growth, inflation, and economic growth, has turned negative for the first time since 2021. This means that "free" money, which traditionally fuels the growth of risky assets, is no longer in the system.
Historically, when this indicator turns negative, capital begins to flow from stocks into long-term bonds, and the yield curve flattens. This is usually followed by a weakening of the stock market over the next 3-6 months. Notably, according to Bull Theory, the current shift is not a consequence of the actions of the new Fed Chairman Kevin Warsh — the market itself has been pricing in tighter conditions throughout the year, and the regulator is merely "catching up" with reality.
The situation is exacerbated by extremely high valuations. Stocks are currently expensive relative to bonds in a way that has only occurred in 5% of cases over the past half-century. Against this backdrop, retail investors continue to actively buy stocks, recording the second-largest weekly inflow into US exchange-traded funds. This creates a paradox: the foundation that supported prices is disappearing, yet retail is entering the market precisely when that support has evaporated.
The 40-year bond bull market is over
A second, deeper perspective is offered by analyst Thierry Borje. He argues that the main event is not happening with AI or cryptocurrencies, but in the bond market, which underpins nearly every "safe" portfolio.
Borje reminds us that in 1981, bond yields reached 14%, and by 2020 they had fallen to nearly zero. This 39-year trend of declining rates ended during the pandemic panic, when the system "flooded" itself with liquidity. In his view, that was when the 40-year bond bull market quietly ended — precisely at the moment when everyone felt saved.
Now that the trend has reversed, valuation, balance sheet quality, and real cash flow come to the forefront. Borje cites JPMorgan data: at current valuations, the annual return of the S&P 500 index could be around zero over a ten-year horizon. In his opinion, this makes the market a rich field for active investors but a death sentence for the passive "buy and hold" strategy.
Risk and opportunity for Bitcoin
For Bitcoin, these signals carry a dual nature. In the short term, it is pure risk. If liquidity dries up and conditions tighten, Bitcoin, as a liquidity-sensitive risky 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 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, though this will not happen immediately and is far from guaranteed.
My conclusion: The market is on the verge of a paradigm shift. Passive strategies that worked for 40 years may stop generating returns. For Bitcoin, this means increased volatility and short-term risks, but in the long term — a chance to establish itself as "digital gold" in a world where traditional safe havens are no longer reliable.