Global liquidity peaked: Bitcoin faces dry years

Markets (3)

• Michael Howell states that money moves markets, with money flows driving the investment cycle and economics being downstream. He distinguishes between financial markets and the real economy, noting investors prefer money in the financial sector to drive asset prices.
• Howell claims US oil prices and Treasury yields are suppressed below equilibrium, which boosts economic growth but can divert liquidity from financial markets. The US 10-year bond yield shows a strong correlation with nominal GDP growth.
• Jeff Ross and Howell assert that the market, particularly the long end, ultimately determines interest rates, not the Federal Reserve. Howell believes the Fed cannot ease policy without further stoking the fast-growing US economy.

Macro (8)

• Howell argues that traditional economic textbooks are often misleading, as real economies tend to follow financial markets, which are led by liquidity. He learned most about economics from market practice, not academia.
• Howell estimates global debt at $350 trillion to $400 trillion, with an average maturity of five years, requiring $70 trillion to $75 trillion in annual rollovers. He claims Western capital markets primarily refinance existing debt, not new capital investment.
• Howell describes a paradoxical feature where strong economies rarely have strong financial markets, and vice-versa. This occurs because money flows between the financial and real economy, pulling liquidity from one to fuel the other.
• Howell identifies a consistent global liquidity cycle of five to six years, driven by the average maturity of debt, and explicitly rejects a four-year Bitcoin cycle. This cycle is identified using data from 90 economies and 30 data series.
• Howell's analysis shows the global liquidity rate of change peaked at the end of Q3 last year and is projected to bottom in the second half of 2027. Bitcoin, as the most liquidity-sensitive asset, has been particularly affected.
• Howell points to a recent three-month annualized M2 money supply growth near 10% and strong Philadelphia Fed data as evidence of significant US demand growth. This signals an upcoming tightening regime.
• Howell predicts a future dominated by a series of quantitative easing processes, as central banks cannot shrink their balance sheets. They will resort to printing money to devalue debt rather than allowing defaults.
• Howell believes Western economies cannot grow out of their debt problems due to demographic sensitivities and a lack of young workforces, despite AI innovation. He suggests Western governments may attempt to direct capital to local schemes.

Fed (2)

• Howell attributes the main driver of liquidity cycles to central banks, which respond to crises by injecting liquidity primarily to bail out the financial system and banks due to pervasive global debt.
• Howell notes that US dollar liquidity and the Federal Reserve are primary drivers for cryptocurrencies, while Chinese liquidity, influenced by the PBOC, has a more direct impact on gold prices with a two to two-and-a-half-month lead.

Banking (3)

• Howell explains that 70% to 80% of all lending is collateral-based, often using existing debt like Treasury securities. This mechanism prevents defaults and requires central banks to consistently provide liquidity.
• Howell defines financial crises as refinancing crises that occur when the debt-liquidity ratio is stretched (around 220-230 historically), indicating insufficient liquidity for debt rollovers. Asset bubbles form when liquidity is abundant.
• Howell forecasts a 'debt maturity wall' from 2025 onwards, where the amount of existing debt needing refinancing will significantly increase, compounded by government funding and AI capex. This will cause the debt-liquidity ratio to rise.

China (1)

• Howell argues that China is undergoing a 'great debasement' by devaluing the yuan domestically against gold due to its debt problem. Capital controls prevent money from easily leaving China, making precious metals a key outlet.

Adoption (1)

• Marty Bent argues Bitcoin will prevail as central banks globally continue to devalue their national currencies, reinforcing Bitcoin's role as a safe haven asset.

Regulation (2)

• Marty Bent believes Washington D.C. will become a crucial city for technological and policy developments over the next five to ten years, surpassing current hubs like Austin and Miami.
• Conner Brown indicates the UK aims to be a 'fast follow' to US digital asset policy, having recently rescinded a stablecoin balance cap and showing unexpected openness to Bitcoin policy discussions in the House of Lords.

AI & Tech (3)

• Conner Brown notes that BPI's Q2 report highlights significant accomplishments in three months, demonstrating how AI tools amplify human productivity and enable deeper research and new international work.
• Conner Brown warns that promoting pessimistic AI narratives while simultaneously building the technology, as some big tech executives do, risks repeating past mistakes like the nuclear energy industry's over-regulation.
• Marty Bent notes that Bitcoiners are early adopters of AI tools, developing complex workflows, unlike traditional think tanks or legacy institutions that demonstrate significant institutional inertia in AI integration.

Nation-State (3)

• Conner Brown explains BPI developed a research paper on Taiwan diversifying its cash reserves into Bitcoin, noting Taiwan's history of using gold to fund an exiled government after fleeing mainland China.
• BPI's paper gained traction in Taiwan, leading to an invitation to brief the Legislative Yuan and Central Bank, who showed surprising understanding and detailed questions regarding Bitcoin's practicalities.
• Conner Brown states the US administration's Executive Order for the Strategic Bitcoin Reserve (SBR) is actively influencing global policy, though its implementation faces bureaucratic hurdles, including a past scandal involving mishandled funds.

China (1)

• BPI research, spearheaded by Sam Lyman, uncovered Chinese foreign influence, specifically from the Party for Socialism and Liberation, aggressively opposing US data center and Bitcoin mining projects with unfounded claims.

Safety (1)

• Conner Brown observes a coalition of diverse groups, including foreign adversaries, radical environmentalists, populists, national security hawks, and effective altruists, are strangely aligned in advocating for AI restrictions.

Agents (3)

• Marty Bent describes TFTC's three-layered 'company brain' for AI agents, integrating flat markdown files, a QMD semantic search database, and an Obsidian vault (Cogni) to provide comprehensive, temporal context from all past content.
• Marty Bent leverages voice dictation via Super Whisper to interact with his AI agent 'Martin,' enabling him to articulate thoughts faster and more comprehensively for tasks like newsletter writing, similar to Napoleon's multi-scribe dictation.
• Conner Brown is increasingly convinced that an abundant future enabled by AI will strengthen the need for Bitcoin, as open-source AI agents, if trained neutrally, naturally prefer Bitcoin and stablecoins for digital commerce.

Open Source (2)

• Conner Brown envisions an optimistic AI future where free and open-source models proliferate, amplifying human agency, creativity, and education to unlock unprecedented individual capabilities, contrasting with a dystopian consumption-focused path.
• Conner Brown emphasizes the critical need for American leadership in open-source AI to prevent strategic adversaries like China from dominating the field and embedding biases that could serve their interests.

Protocol (2)

• Aven offers a Bitcoin Visa card that provides a line of credit up to $1 million, backed by Bitcoin custodied by BitGo, featuring fixed rates starting at 7.99% APR and 2% unlimited cash back.
• Unchained provides collaborative multisig Bitcoin custody, securing over $12 billion in Bitcoin for more than 12,000 clients, where users hold two keys and Unchained holds one, ensuring institutional-grade security and user control.

Health (1)

• CrowdHealth offers crowdfunded healthcare as an alternative to health insurance, significantly reducing monthly costs and negotiating prices down by 50-80%, with members paying a small amount ($500-$3000) for health events.

Business (3)

• Steve Hou joined Silicon Data almost two months ago as Head of Research, aiming to bring data and derivatives like futures contracts to the physical AI compute market.
• Silicon Data seeks to enable hedging against risks in the AI physical compute market, which Steve Hou estimates to be hundreds of billions, if not trillions, in size.
• Steve Hou's Token Expenditure Index, an expenditure-weighted price index similar to the PCE for AI, tracks token price dynamics aggregated by usage patterns, reflecting consumer behavior and quality-price tradeoffs.

Markets (3)

• Steve Hou believes futures contracts are a natural hedging tool for data center providers, compute providers, and companies buying compute, offering revenue certainty and enabling bolder acquisition strategies.
• The Token Expenditure Index primarily covers independent developers and small/medium enterprises using public routing platforms, making it a leading indicator for price sensitivity rather than total market demand.
• Drawing on Jevon's paradox, Steve Hou argues that while frontier models' margins may face pressure from cheaper alternatives, the resulting market expansion will still lead to overall growth and profitability.

AI Infrastructure (3)

• The AI compute market, currently dominated by a few players like OpenAI and Anthropic, is expected to fragment as open models and enterprise AI drive broader demand, especially for inference.
• The GPU forward curve, initially backwardated (downward sloping), has shifted upward and flattened into contango, implying cloud providers are less willing to discount long-term contracts due to firm demand and supply shortages.
• Steve Hou expects increased demand for storage and memory from multimodal AI (voice, video), noting that conversational AI advancements, like the ability to interrupt, generate significantly more data.

Models (1)

• Steve Hou notes the index's recent plateau reflects a shift towards 'token efficiency' and substitution among models, not a decrease in overall token demand.

Chips (3)

• Steve Hou's GPU Rental Index tracks on-demand rental rates for chips like the H100, A100, and B200, aggregating contracts from various providers to create apple-to-apple comparisons.
• The A100 chip's strong and increasing rental rate signals robust inference demand, indicating even older chips maintain value as workhorses for less computationally intensive tasks.
• Memory (DRAM) prices are surging due to models' increasing memory hunger and context length, but Steve Hou anticipates algorithmic innovations like Kimi's memory efficiency improvements will eventually temper linear demand growth.

Politics (1)

• Steve Hou predicts US-China geopolitical decoupling will drive separate but parallel growth in AI capex, with both nations doubling down on investment and potentially restricting cross-border model access.

Enterprise (1)

• The next major driver for AI is genuine enterprise adoption and demonstrable return on investment (RORI), enabled by cheaper models that allow companies to experiment without prohibitive token budgets.

Politics (11)

• Zohran Mamdani's first six months as New York City Mayor included freezing rent on nearly a million apartments and progressing universal childcare, fulfilling key campaign promises. Lulu Garcia Navarro notes his national political force after progressive endorsements.
• Mamdani states his administration paved over 170,000 potholes and delivered the lowest recorded numbers for shootings, victims, and murders in NYC history. They also secured over $10 million for workers and $64 million for tenants.
• Mamdani views President Trump's call for his deportation as part of the normalized corrosion of political life. He argues democratic socialism counters fear-mongering by demonstrating tangible results, prioritizing disagreement over demonization.
• Mamdani emphasizes that the normalization of political violence leads to threats against him and his family, and creates fear for ordinary citizens. He believes politics should allow vehement disagreement without silencing debate through intimidation.
• Mamdani, as a Democrat and Democratic Socialist, believes his party needs a vision for working people beyond merely opposing Republicans. He argues the struggles of one in four New Yorkers living in poverty reflect broader national issues.
• Mamdani's 58% approval rating reflects progress on universal childcare and a rent freeze, though free buses are still pending. He aims for free childcare for 2,000 children this fall, expanding to every two-year-old in four years.
• Mamdani's top advisor, Morris Katz, was involved in Graham Plattner's campaign which imploded over sexual assault allegations. Mamdani states his faith in Katz is undiminished, acknowledging Katz's decision to end the campaign.
• Mamdani advocates for a "big tent" Democratic Party that includes moderate Democrats, even those who work with APEC. He defines politics as the "art of making the principled possible" and focuses on areas of agreement.
• Mamdani attributes his smiling political persona to his parents, emphasizing showing the world who you are. He believes successful politicians need "honesty" about their beliefs and the ability to explain their purpose.
• Mamdani and his wife, Rama, navigate being newlyweds while he leads New York City, which he describes as a lot but wouldn't change. He considers scrutiny of his wife unfair and antiquated, viewing her primarily as an artist.
• Mamdani aims to make New York City a "fun" place by ensuring affordability extends to enjoyment, echoing the "eight hours for rest" labor adage. Initiatives include securing 1,000 World Cup tickets for $50 and making Fan Fests free.

Elections (2)

• Mamdani confirms his partnership with Alexandria Ocasio-Cortez on New York endorsements, citing her as an inspiration for fighting for working people. He views their collaboration as a collective effort to achieve an affordability agenda.
• Mamdani endorsed Dari Alisa Avila Chevalier, a progressive candidate with a "babies, not bombs" vision, over an incumbent supported by APEC. He criticized federal policy for prioritizing billions in Israeli military funding over the needs of impoverished US districts.

War (2)

• Mamdani agrees with Hassan Piker that politicians lacking honesty about the Gaza "genocide" cannot be trusted on domestic issues, eroding public confidence. He notes many Congress members privately acknowledge the situation but won't state it publicly.
• Mamdani believes Israeli Prime Minister Benjamin Netanyahu, facing an ICC warrant, "belongs in the Hague" as a war criminal. He states New York City will follow all applicable laws regarding a potential arrest during a UN visit.

Diplomacy (1)

• Mamdani advocates for the Democratic Party to become a "party of human rights for all people," including Palestinians, without exceptions. He asserts presidential candidates must be honest about US policy's consequences and offer alternatives.

Immigration (1)

• Mamdani supports a "secure and humane" US border policy that follows asylum laws, opposing ICE's "largest deportation machine." He states New York City cooperates on over 170 serious crimes but not civil immigration enforcement.

Society (1)

• Mamdani defines the working class as anyone who "has to work to pay your bills," including those working to afford basic dignities. He prioritizes including more people in political vision rather than debating strict income definitions.