The end of the bond era: how the disappearance of liquidity threatens Bitcoin and markets
The financial system is entering a new, much more volatile phase. Two independent analysts agree on one thing: we are witnessing a historic shift that carries serious risks for Bitcoin and the entire risk asset market. This is not about a temporary correction, but a fundamental restructuring of the rules of the game.
The first signal came from analyst Bull Theory. His indicator of excess liquidity in the financial system, calculated as the difference between the growth rate of the money supply, inflation, and economic growth, has turned negative for the first time since 2021. This means that the "free" money that typically fuels the growth of stocks and cryptocurrencies is gone. Historically, when this indicator falls below zero, capital begins to flow from risky assets into safe havens—primarily long-term bonds. The yield curve flattens, and this usually foreshadows a decline in stock returns over the next 3-6 months. Notably, according to Bull Theory, the Federal Reserve is merely "catching up" to market expectations that the market has been pricing in all of last year.
A second, even deeper perspective comes from analyst Thierry Borges. He argues that all attention is focused on the wrong bubble. While the crowd debates AI and cryptocurrencies, the main event is unfolding in the bond market—the foundation of any "safe" portfolio. According to his data, the 40-year bond bull market that began in 1981, when yields reached 14%, and ended at zero in 2020 during the pandemic, is over. The system then "flooded" itself with liquidity, but that growth cycle has ended. Now the trend is reversing: bond yields will rise, and their prices will fall. This changes everything.
Borges emphasizes that the era of passive investing, where one could simply buy an index and hold it, is coming to an end. Fundamental analysis, assessment of company balance sheet quality, and real cash flow are taking center stage. He cites data from JPMorgan, according to which, at current valuations, the return on the S&P 500 index over a ten-year horizon could be near zero. This makes the market a "rich field" for the active investor, but simultaneously a zone of increased risk for those accustomed to easy money.
What does this mean for Bitcoin?
For Bitcoin, both signals primarily carry short-term risk. As an asset highly sensitive to liquidity, BTC risks coming under pressure alongside overvalued stocks. The disappearance of excess liquidity is a direct blow to speculative capital.
However, in the long term, within Borges' logic, there is a flip side. If the traditional "buy and hold the index" model 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. But this will not happen immediately and is far from guaranteed. Right now, we are seeing a classic "risk-off" scenario: liquidity is leaving, and Bitcoin, as the most volatile instrument, is under attack.