1/ The liquidity cycle is the most important driver of digital asset prices so lets take a look at the data and see what it could mean for crypto. Starting off- we are clearly late in the liquidity cycle. h/t @crossbordercap

Yet the consensus view is that Bitcoin will follow M2 higher and have a catch-up trade to near $200k.

3/ But liquidity growth momentum has already slowed and is close to becoming a headwind for digital asset prices.

2/ Yet the consensus view is that Bitcoin will follow M2 higher and see a catch up trade to near $200k.

3/ But liquidity growth momentum has already slowed and is close to becoming a headwind for digital asset prices.

4/ US Fed net liquidity has already slowed down and is expected to continue slowing into year end.

5/ It should help that the Fed seems close to ending QT based on Jay’s latest comments, but it might not be as bullish as people think.

6/ Jay also made comments about changing the composition of the balance sheet to match the composition of outstanding treasuries, which thanks to "Treasury QE" are now skewed towards bills and would require selling long end securities to bring into balance. h/t @FedGuy12

7/ QT never happened in 10+yr USTs post-2022. While long end rates look headed lower (TLT higher) for now on risk-off scare, this Fed rebalancing could send long end rates higher once the market realizes the impact. h/t @Econimica

8/ The consensus is that the Fed ending QT is the first step to restarting QE. But is that what a Trump aligned Fed is likely to do? If you believe Treasury Secretary Scott Bessent's WSJ article in opposition of QE - the answer is no.

9/ And yes, it seems short rates are likely to still head a bit lower, much of this is already priced in the market - unless you think we're close to some type of liquidity event or financial crisis.