The U.S. market is entering a new round of liquidity release cycle, and structural funding support may drive risk assets like BTC to continue rising, with the trend expected to last until 2026. The current funding structure, credit environment, and the early stages of past bull markets are quite similar: ample liquidity, improved credit conditions, and a policy shift towards dovishness, with multiple positive factors resonating to push asset prices upward.

1

Since the fourth quarter of 2018, U.S. money market funds have rapidly expanded from $3 trillion to $7.4 trillion, reaching a historic high, with current annual interest income at $320 billion, constituting significant incremental funds flowing into high-yield assets. Meanwhile, corporate buybacks have also noticeably accelerated. Since 2025, announced buyback amounts have reached $984 billion, with the total for the year expected to exceed $1.1 trillion. Current volatility is at a low level, and these funds will continue to flow into U.S. stocks, boosting valuations.

2

The structure of the financial system is further amplifying the impact of liquidity. Since 2008, the Federal Reserve has begun paying interest on reserves to banks, with this amount currently reaching $3.4 trillion, generating annual interest of up to $176 billion. In the current high-interest-rate environment, this mechanism makes money market funds and commercial banks the main beneficiaries. However, our model shows that the pace of the Federal Reserve's interest rate cuts has lagged market expectations for 32 consecutive months. To narrow this gap, approximately 62 basis points of cumulative rate cuts will still be needed in the coming months.

3

Credit issuance is warming up. Since April 2025, U.S. commercial and industrial loans have increased by a cumulative $74 billion, showing early signs of a new round of credit expansion cycle. Since June, credit spreads have continued to narrow, and the financing environment has improved, which historically has been favorable for BTC; this trend has also been initially reflected in BTC's price performance. Our model indicates that inflation will gradually fall back to the Federal Reserve's target range of 2%, and volatility is converging, providing more ample policy space for a rate cut in September.

4

On the fiscal side, liquidity injection is also being intensified through bond issuance. Since the "Great Beautiful Act" raised the debt ceiling by $5 trillion, the Treasury has net issued $789 billion in government bonds in less than six weeks. This round of large-scale bond issuance coincides with BTC starting a new upward trend. Historically, during the fiscal expansion cycle led by Trump, BTC prices often strengthened in tandem with government bond issuance.

Disclaimer: The market has risks, and investment should be cautious. This article does not constitute investment advice. Trading in digital assets may carry significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.

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