Hold on for the next three months, a wild bull market may arrive by the end of the year

A new round of liquidity cycle is about to begin, with capital appreciating and labor diverging, the US dollar weakening while alternatives strengthen, and Bitcoin shifting from a speculative asset to a systemic hedging tool.

Written by: arndxt

Translated by: AididiaoJP, Foresight News

Ordinary Labor Is Irrelevant

"Ordinary labor is irrelevant" because, under today's macro system, a weak labor market does not prevent economic growth. It only forces the Federal Reserve to cut rates and inject more liquidity into the market. Productivity, capital expenditure, and policy support mean that capital continues to appreciate, even as individual workers suffer.

The importance of individual workers to production is diminishing, as their bargaining power is gradually collapsing in the face of automation and global capital expenditure.

The system no longer needs strong household consumption to drive growth; capital expenditure dominates GDP calculations.

The plight of workers directly fuels capital gains. For asset holders, pain in the labor market is good news.

The struggles of workers do not disrupt the economic cycle. The market no longer prices for the "common man"; it now prices for liquidity and capital flows.

The market is once again being driven by the following factor: liquidity.

Global M2 has soared to a historic high of 112 trillions USD. Over more than a decade of data, Bitcoin's long-term correlation with liquidity remains at 0.94, tighter than with stocks or gold.

When central banks ease policy, Bitcoin rises. When they contract liquidity, Bitcoin suffers.

Let's take a look back at history.

• 2014-15: M2 contracted, Bitcoin crashed.
• 2016-18: Steady expansion, BTC's first institutional bull market.
• 2020-21: COVID liquidity flood, Bitcoin went parabolic.

Today, M2 is rising again, and Bitcoin is outperforming traditional hedging tools. We are once again in the early stages of a liquidity-driven cycle.

The TGA (Treasury General Account) replenishment in 2025 poses a greater risk than in previous cycles, as the overnight reverse repo buffer has essentially been depleted. Every dollar raised now directly drains liquidity from active markets.

Cryptocurrencies will be the first to signal stress. The contraction of stablecoins in September will be a leading indicator, flashing red long before stocks or bonds react.

The resilience ranking is clear:

• During stress: BTC > ETH > altcoins (Bitcoin absorbs shocks best).
• During recovery: ETH > BTC > altcoins (as capital flows and ETF demand re-accelerate).

Base forecast: a highly volatile September to November, marked by liquidity stress, followed by stronger performance before year-end as issuance slows and stablecoin growth stabilizes.

Looking at the big picture, the situation is clear:

• Liquidity is expanding.
• The US dollar is weakening.
• Capital expenditure is surging.
• Institutions are reallocating into risk assets.

But what makes this moment unique is the convergence of various forces.

The Fed Trapped Between Debt and Inflation

The Federal Reserve is in a bind, with debt servicing costs becoming unbearable, yet inflationary pressures persist.

Yields have already plunged, with the US 2-year Treasury yield falling to 3.6%, while commodities hover near historic highs.

We've seen this scenario before: in the late 1970s, yields softened while commodities soared, leading to double-digit inflation. Policymakers had no good options then, and they have even fewer today.

For Bitcoin, this tension is bullish. In every historical period when policy credibility broke down, capital sought inflation-hedging assets as safe havens. Gold captured these flows in the 1970s; today, BTC is positioned as a hedging tool with higher convexity.

Weak Labor, Strong Productivity

The labor market tells a sobering story.

The quit rate has plunged to 0.9%, ADP employment is below the long-term average, and confidence is weakening. Yet unlike 2008, productivity is rising.

Driving factor: an AI-led capital expenditure supercycle.

Meta alone has pledged $600 billions by 2028, with trillions flowing into data centers, onshoring, and energy transition. Workers are being replaced by AI, but capital is appreciating. This is the current economic paradox: the real economy suffers, while Wall Street financial markets boom. The result is predictable: the Fed cuts rates to cushion the labor market, while productivity remains vibrant. This combination injects liquidity into risk assets.

The Quiet Accumulation of Gold

As the stock market wobbles and cracks appear in the labor market, gold has quietly re-emerged as a systemic hedging tool. Just last week, $3.3 billions flowed into GLD (SPDR Gold ETF). Central banks are the main buyers: 76% of central banks intend to increase reserves, up from 50% in 2022.

Measured in gold, the S&P 500 is already in a stealth bear market: down 19% year-to-date, down 29% since 2022. Historically, three consecutive years of stocks underperforming gold marks a long-term structural rotation (1970s, early 2000s).

But this is not a retail-driven frenzy; it's patient institutional money, strategic capital, quietly accumulating. Gold is taking on the stabilizer role once played by bonds and the dollar. Yet Bitcoin remains a higher-beta hedging tool.

The Decline of the Dollar and the Search for Alternatives

The US dollar is experiencing its worst half-year since the collapse of the Bretton Woods system in 1973. Historically, whenever Bitcoin diverges from the dollar, systemic shifts follow. In April, the US Dollar Index (DXY) fell below 100, echoing November 2020, which was the starting gun for the liquidity-driven crypto rally.

Meanwhile, central banks are taking diversification measures. The dollar's share of global reserves has dropped to about 58%, and 76% of central banks plan to increase gold holdings. Gold is absorbing these quiet capital allocations, but Bitcoin is poised to capture marginal flows, especially from institutions seeking returns above passive hedging.

Near-Term Stress: Treasury Account Replenishment

Note: Treasury account replenishment refers to actions by the US Treasury to increase its cash balance at the Federal Reserve (TGA), a process that drains liquidity from the financial system.

Treasury account replenishment is approaching $500-600 billions.

In 2023, ample buffers (RRP, foreign demand, bank balance sheets) softened the impact. Now those buffers are gone.

Every dollar of replenishment now directly drains the market. Stablecoins, the cash channel of crypto, contract first, and altcoin liquidity dries up.

This means the next 2-3 months will be turbulent. Expect BTC to outperform ETH, ETH to outperform altcoins, but all coins will feel the pressure—liquidity risk is real.

Treasury account replenishment will dampen the trend, but it's just a storm in the rising tide. By the end of 2025, as issuance slows and the Fed turns dovish, Bitcoin is expected to test $150,000 to $200,000, supported not only by liquidity but also by structural inflows from ETFs, corporations, and sovereign nations.

Thesis

This is the beginning of a liquidity cycle in which capital appreciates and labor diverges, the US dollar weakens while alternatives strengthen, and Bitcoin shifts from a speculative asset to a systemic hedging tool.

Gold will play its role. But Bitcoin, with its higher liquidity beta, institutional channels, and global accessibility, will be the leading asset of this cycle.

Liquidity determines destiny, and the next chapter of destiny belongs to Bitcoin.