The end of the "cheap money" era: what awaits bitcoin amid a liquidity crisis
The financial system is entering a new, much more severe phase. Two independent analysts — Bull Theory and Thierry Borje — are warning of tectonic shifts that threaten not only traditional markets but also Bitcoin. This concerns the deepest liquidity crisis since 2021 and the end of a 40-year bull cycle in the bond market.
Bull Theory highlights a critical indicator: excess liquidity in the financial system has turned negative for the first time since 2021. This metric is calculated as the difference between the growth rate of the money supply, inflation, and economic growth. It is this "surplus" that typically fuels stock markets. Now, that source is gone.
When liquidity turns negative, capital begins to flow from stocks into long-term bonds. The yield curve flattens, which historically foreshadows a decline in stock returns over the next 3–6 months. Bull Theory emphasizes that the new Fed Chair Kevin Warsh is not the root cause of this shift — the market itself has been pricing in tightening over the past year, and the regulator is merely "catching up" to reality.
The 40-Year Bond Cycle Is Over
Thierry Borje offers a different perspective. While everyone is discussing AI and cryptocurrencies, the main event is unfolding in the bond market, which underpins nearly every "safe" portfolio. In 1981, bond yields reached 14%, and by 2020, they had fallen to 0%. This was a 39-year downtrend that ended during the COVID-19 pandemic, when the system flooded itself with liquidity. According to Borje, that was when the 40-year bull market in bonds quietly ended.
Now the trend has reversed. Valuation, balance sheet quality, and real cash flow are taking center stage. Borje cites JPMorgan data: at current valuations, the S&P 500 index's ten-year return could trend toward zero. In his view, this makes the market a "rich field" for active investors but a death sentence for the passive "buy and hold" strategy.
What Does This Mean for Bitcoin?
For Bitcoin, both signals primarily carry short-term risk. As a liquidity-sensitive risk asset, BTC could come under pressure alongside overvalued stocks if liquidity continues to dry up and conditions tighten further.
However, there is a flip side to Borje'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 begin seeking 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.
Cryptalist's opinion: We are witnessing a classic transition from the era of "passive wealth" to the era of "active survival." Bitcoin, like any risk asset, will come under pressure during the liquidity contraction phase. But it is precisely in such periods that new long-term trends are formed. Investors should prepare for increased volatility and reconsider their strategies, prioritizing asset quality over blindly following the index.