Crypto news

The global financial system is undergoing a fundamental shift that directly affects all asset classes — from traditional bonds and stocks to cryptocurrencies. Two independent analysts, whose conclusions I find extremely compelling, point to the end of an entire era: excess liquidity in the system has turned negative for the first time since 2021, and the 40-year bull market in bonds has come to an end. For Bitcoin, this creates a unique set of risks and, simultaneously, long-term opportunities.

Liquidity Running Out: A Signal for Risky Assets

My analysis of Bull Theory data confirms a critical moment: the excess cash indicator in the financial system has turned negative. This indicator is calculated as the difference between the growth rate of the money supply, inflation, and economic growth. It is this "residual" that traditionally fueled the stock market, and now it has simply disappeared.

Historically, when this indicator turns negative, capital begins to flow from stocks into long-term bonds. The yield curve flattens, and over the following 3–6 months, this typically leads to a weakening of stock returns. Notably, in my assessment, the new Fed Chair Kevin Warsh is not the initiator of this shift — the market itself has been pricing in tightening all year, and the regulator is merely "catching up" with reality.

The End of the 40-Year Bond Bull Market

Thierry Borger's perspective complements this picture from a macro-historical standpoint. He reminds us that in 1981, bond yields reached 14%, and by 2020 they had fallen to 0%. This represents 39 years of declining rates, which ended during the pandemic crisis when the system "flooded" itself with liquidity. It was then that the 40-year bond bull market quietly concluded.

Now the trend has reversed. According to JPMorgan, at current valuations, the S&P 500 index's return over a ten-year horizon could trend toward zero. This means the old model of "buy the index and hold" is ceasing to work, while valuation, balance sheet quality, and real cash flow come to the forefront.

A Dual Scenario for Bitcoin

For Bitcoin, both signals primarily carry short-term risk. If liquidity dries up and conditions tighten, BTC, as a liquidity-sensitive risky asset, could come under pressure alongside overvalued stocks. However, in Borger's logic, there is also a flip side: if traditional "safe havens" — bonds — lose their reliability, some capital may eventually seek alternatives outside traditional markets.

My professional opinion: Over a 6–12 month horizon, Bitcoin will likely continue to correlate with stock indices, and we may see significant downside volatility. However, the structural reversal in bond yields and the retreat of the passive "buy and hold" strategy create fertile ground for assets with a clear narrative and limited supply. Bitcoin has the potential to compete for a role as one of the assets of the new era, but this will not happen immediately and is far from guaranteed. Investors should prepare for a period of high selectivity and active management, rather than passive waiting.