What Is Bitcoin Telling Us? | Michael Howell, Macro Analyst

— Bitcoin may be signaling an early turn in the global liquidity cycle, earlier than Michael Howell's previous base case of a 2027 trough; holding above $70,000 would be meaningful evidence of this shift.

— The Federal Reserve and Treasury are operating in a new "Treasury QE" regime, jointly managing bank reserves, repo collateral volatility, and short-dated debt issuance rather than relying solely on Fed funds rate policy.

— Yields are rising due to strong nominal GDP growth and rising rate expectations, not fiscal deterioration or loss of confidence in US Treasury assets; term premium remains flat or falling globally.

— Global liquidity is cyclical (5–6 year spans) while debt grows exponentially; the economy currently experiences tight liquidity despite strong real growth—a hallmark of late-cycle speculation phase.

— Bitcoin is 5× more sensitive to global liquidity changes than gold (40–45% of Bitcoin's drivers vs. 8.5% annually for gold); both serve as monetary inflation hedges in a credit-money world.

— Asset allocation should rotate through four liquidity cycle regimes: rebound (equities, credit), calm (equities, commodities), speculation (commodities), and turbulence (government bonds, avoid equities/commodities).

— Bitcoin trading at ~$70,000; holding this level could signal liquidity cycle inflection; $70,000 acts as a key technical support and psychological threshold.

— US 10-year Treasury yields elevated at 5.5% (vs. reported 3.5% inflation), but TIPS yielding 3% real remains attractive; yield curve flattening despite consensus expectations for steepening.

— Global liquidity index currently ~$196 trillion (up from $185 trillion a year ago); liquidity growth rate peaked late 2025 and is declining, consistent with late-cycle dynamics.

— Bid-to-cover ratios on Treasury auctions falling but not alarming; term premium compressed flat across major economies (US, Germany, China).

— Russell 2000 likely in bear market; credit spreads widening; AI debt (CoreWeave) pricing in significant default risk as funding costs rise.

— Watch the MOVE Index (bond volatility) as a leading indicator: readings above 90 impair collateral multipliers and liquidity creation; readings above 135 signal recession risk. Current elevation suggests Treasury volatility management (buybacks) will intensify.

— Allocate to monetary inflation hedges (gold, Bitcoin) on weakness; gold should double in 10 years at 8–9% annual liquidity growth; Bitcoin's higher 40–45% sensitivity to liquidity growth means it doubles even faster, making a 5% allocation to crypto meaningful over multi-year horizons.

— Position defensively for late-cycle turbulence: favor government bond duration over equities and commodities; technology and large-cap equities will likely outperform small-cap and international equities during the downswing.