Original author: @RaoulGMI
Translated by: Peggy, BlockBeats
Editor's note: When the market is in panic, liquidity is tightening, and asset rotation is weak, being bullish often seems out of place. This article presents a contrarian perspective: if global liquidity remains the dominant macro variable, then the restart of the debt refinancing cycle could trigger the next round of "liquidity flood." This is a game of time and patience—after the "pain," it may be the starting point for restarting growth.
The following is the original text:
The Main Plot of the Market
I know that almost no one is willing to listen to bullish views right now.
The market is in panic, and everyone is blaming each other. But the road to "Valhalla" is actually not far away.
If global liquidity is the most decisive macro factor at the moment, then it is the only thing we should focus on.
Remember! The real main plot of the market right now is the rolling refinancing of that $10 trillion debt. Everything else is a subplot. The game over the next 12 months will revolve entirely around this.
Currently, due to the government shutdown, the Treasury's TGA account is rapidly accumulating cash with nowhere to spend it, leading to a sharp tightening of liquidity. This cannot be offset by reverse repos (as that liquidity has already been drained), and quantitative tightening (QT) is further drawing blood.
This directly impacts the market, especially the crypto assets that are most sensitive to liquidity.
Traditional asset management institutions have generally underperformed their benchmarks this year, marking the worst performance in recent years. Now they have to passively "chase the rise," which has made tech stocks perform more steadily than crypto assets. The inflow of 401K funds has also provided some support.
However, if this liquidity drought continues for longer, the stock market will also struggle to avoid a downturn.
Once the government shutdown ends, the U.S. Treasury will re-spend $250 billion to $350 billion within a few months, and quantitative tightening will stop, nominally expanding the balance sheet again.
As liquidity returns, the dollar may weaken again.
Tariff negotiations will also come to a close, and policy uncertainty will gradually dissipate.
Meanwhile, the continued issuance of government bonds will inject more liquidity into the market through banks, money market funds, and even the stablecoin system.
Next, interest rates will continue to decline. The economic slowdown caused by the shutdown will serve as a reason for rate cuts—but this does not mean an economic recession.
On the regulatory front, adjustments to the SLR (Supplementary Leverage Ratio) will free up more balance sheet space for banks, supporting credit expansion.
The "CLARITY Act" is also expected to pass, providing the much-needed regulatory framework for banks, asset management institutions, and companies to adopt crypto assets on a large scale.
And that "Big Beautiful Bill" will further stimulate the economy, creating a strong growth scenario for the 2026 midterm elections.
The entire system is being restructured toward one goal: a strong economy and a prosperous market in 2026.
Meanwhile, China will continue to expand its balance sheet, and Japan will strive to support the yen and introduce fiscal stimulus.
As interest rates decline and tariff uncertainties dissipate, U.S. manufacturing activity (ISM index) will also rebound.
So, the key now is: to get through this "Window of Pain."
On the other side of it is a "liquidity flood."
Always remember that old rule: don't mess it up.
Be patient, endure the volatility.
Such pullbacks are not uncommon in a bull market; their purpose is to test your conviction.
If you have the capacity, take the opportunity to buy at lower prices.
TD;DR (One-sentence summary)
When this number (liquidity index) rises, all other numbers will rise accordingly.
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