Global M2 chart tops
Macro Liquidity, Fed Policy
The biggest structural takeaway is that crypto will not decouple from macro.
The timing and magnitude of liquidity rotation, the Fed’s rate trajectory, and institutional adoption patterns will define how this cycle evolves.
Unlike 2021, the coming altseason, if it materializes, will be slower, more selective, and more institutionally focused.
If the Fed delivers liquidity via rate cuts and bond issuance while institutional adoption compounds, 2026 could be the most significant risk cycle since 1999–2000, with crypto positioned to benefit, albeit in a more disciplined, less explosive fashion.
1. Fed Policy Divergence and Market Liquidity
In 1999, the Federal Reserve hiked rates by 175bps while equities rallied into the 2000 peak. Today, forward markets are pricing the opposite: 150bps of cuts by year-end 2026. If realized, this would represent a liquidity-adding environment rather than liquidity-draining.
The setup into 2026 could mirror 1999/2000 in terms of risk appetite, but with rates moving in the opposite direction. If true, 2026 may prove to be “1999/2000 on steroids.”
2. The Crypto Market’s New Backdrop vs. 2021
Comparing today with the last major cycle:
Tighter capital discipline: Higher rates and lingering inflation enforce more selective risk-taking.
No repeat of COVID-era liquidity surge: Without an M2 spike, adoption and allocation must be the growth driver.
Market size x10: A larger market cap base means deeper liquidity, but outsized 50–100x returns are less likely.
Institutional flows: With mainstream and institutional adoption now entrenched, flows are more gradual, favoring slower rotation and consolidation rather than explosive rotation across assets.
3. BTC’s Lag and the Liquidity Chain
BTC has lagged relative to liquidity conditions because fresh liquidity has been trapped upstream in T-bills and money markets. Crypto, as the furthest point on the risk curve, benefits only after liquidity flows downstream.
Catalysts for crypto outperformance:
Bank lending expansion (ISM > 50).
Outflows from money market funds post-rate cuts.
Treasury issuance of long-dated bonds, lowering LT rates.
A weaker dollar easing global funding pressure.
When these unlock, crypto historically rallies late-cycle, after equities and gold.
4. Risks to the Base Case
Despite this bullish liquidity framework, several risks loom:
Rising long-end yields (from geopolitical stress).
Dollar strength tightening global liquidity.
Weak bank lending or tighter credit conditions.
Liquidity stalling in money market funds instead of rotating into risk assets.
The next cycle will be defined less by speculative liquidity shocks and more by structural integration of crypto into global capital markets.
With institutional flows, disciplined risk-taking, and policy-driven liquidity shifts converging, 2026 could mark crypto’s transition from boom-bust to systemic relevance. 👇🧵
Macro Pulse Update 20.09.2025, covering the following topics:
1️⃣ Macro events for the week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
4️⃣ Key Economic Metrics
5️⃣ EU Spotlight
1️⃣ Macro events for the week
Previous Week
Next Week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
Macro & Markets
Fed Cuts Rates: Jerome Powell announced the first 2025 rate cut (25bps), bringing rates to 4.0–4.25%. Markets expect further cuts in Oct & Dec as job growth slows and inflation moderates.
Bitcoin Reaction: BTC jumped above $117K, its highest since Aug 17.
Crypto & Payments
PayPal Expands Crypto: US users can now send BTC, ETH, and other tokens across PayPal, Venmo, and compatible wallets. New PayPal Links enable one-time crypto transfers exempt from 1099-K reporting.
Tokenization & TradFi
London Stock Exchange (LSEG) launched its Digital Markets Infrastructure platform for tokenized private funds. First user: MembersCap’s MCM Fund 1. Seen as a major step toward RWA tokenization.
DeFi & Onchain Activity
Ethereum Stablecoins: Supply hit an all-time high of $166B, led by USDT ($88B) and USDC ($48B). Ethereum cements its role as DeFi’s settlement backbone.
Pump.fun Comeback: Solana memecoin launchpad recorded $3.38M daily revenue, briefly surpassing Hyperliquid. Buyback program drove a sharp rebound, accumulating 6.7% of PUMP supply since July.
4️⃣ Key Economic Metrics
Tariffs Are Backfiring on US Manufacturing
ISM PMI at 48.7 signals contraction: new orders modestly up, but output, exports, and employment all falling.
Tariffs are raising input costs, not competitiveness. Electronics and appliances see rising development costs and 24% higher prices — yet margins are still shrinking.
Instead of re-shoring, firms are exploring offshoring to bypass tariff-driven cost inflation. The policy goal is flipping on itself.
Employment & Investment Freeze
Transportation sector shows a stagflation dynamic: “prices up, volumes down.”
Appliance makers have cut 15% of high-skill US jobs (engineers, finance, IT).
Capex and hiring are frozen as policy uncertainty stalls long-term bets.
Early signs of industrial hollowing are emerging, not revival.
Structural Policy Misstep
In the 1980s, targeted tariffs bought time for US motorcycle makers to restructure.
Today, blanket tariffs (often higher on parts than finished goods) distort cost structures and reduce competitiveness.
This is effectively a tax on domestic production, compounding inflationary pressures instead of fostering resilience.
Macro Takeaway
Broad tariffs are accelerating de-industrialization rather than reversing it.
The PMI slump, layoffs, and stalled investment all point to tariffs undermining the very manufacturing base they were designed to protect.
The bigger risk: US firms shift production overseas, hollowing out domestic capacity while raising consumer prices.
Immigration Policy Shift Is Reshaping US Labor Markets
Key Takeaway
Immigration restrictions are creating structural labor mismatches: industries dependent on unauthorized labor are stalling, without offset from native workers.
Net result: slower job growth + higher prices = drag on GDP and risk of sector-specific inflation.
Employment Divergence
Peterson Institute data shows:
2023–H1 2024: immigrant-reliant industries and the broader private sector grew at similar pace.
2025: employment in immigrant-reliant sectors is flat-to-falling, while non-immigrant sectors keep expanding.
Industries Most Exposed
Construction, select manufacturing, tech/R&D, hospitality, landscaping, warehousing, repair services, and home health aides.
Zero job growth since early 2025 in this group.
Native-born workers are not filling the gap.
Macro Consequences
Labor Shortages: Supply squeeze is emerging in sectors critical to services and production.
Price Pressures: Shortages already lifting prices in agriculture — likely to spread to services and construction.
Employment Dynamics: Unemployment among native-born workers is rising despite unmet labor demand, reflecting mismatched skills and geographic stickiness.
US Inflation Accelerates, Stagflation Risks Rising
Macro Takeaway
US is entering a stagflation-lite environment: inflation accelerating while labor markets weaken.
Markets are priced for Fed easing and AI-driven optimism, but policy risks (tariffs, immigration, fiscal stress) could reprice bonds and equities quickly.
Data Snapshot
CPI (Aug): +2.9% YoY, highest since Jan ’25.
Core CPI: +3.1% YoY (unchanged, but still elevated).
Unemployment Claims: 263k, highest since Oct ’21.
10Y Yield: dropped from 4.25% → 4.01% in September.
Drivers of Inflation
Tariffs: Durable goods prices +1.9% YoY, biggest jump since 2022.
Immigration Policy: Labor shortages in meat-processing → beef/veal +13.9% YoY.
Broad Pressures: Inflation momentum building even as growth weakens.
Equity Market Paradox
S&P, Dow, Nasdaq all at record highs despite stagflation signals.
Investor psychology:
Anticipation of Fed rate cuts.
AI euphoria: A single tech stock +36% last week, fueling spillover into tech and energy (AI demand = electricity demand).
Bond Market Dynamics
Yields falling not because of disinflation expectations, but due to worsening growth outlook + expectations of monetary easing.
Risks of rebound in yields:
Re-acceleration in inflation.
Potential erosion of Fed independence.
Fiscal sustainability questions.
Capital outflows from global disengagement.
5️⃣ EU Spotlight
ECB Holds Rates Steady at 2%
Macro Takeaway
ECB signaling policy confidence while Fed shifts dovish = stronger euro cycle.
Key risk: trade-driven shocks could test the ECB’s inflation stability narrative.
Policy Snapshot
ECB Benchmark Rate: 2% (unchanged for 2nd month).
Fed Divergence Reversing: ECB paused easing while Fed is expected to cut, narrowing the rate gap → euro strengthening vs USD.
ECB’s Rationale
Inflation stabilized: Lagarde: “disinflationary process is over” and inflation is “where we want it to be.”
Improved outlook: Decision signals confidence in growth prospects.
FX & Market Impact
Euro rallied sharply on ECB’s steady hand.
As Fed eases while ECB holds, rate differentials compress, reinforcing euro strength and USD weakness.
Risks Ahead
Tariff spillovers:
If US tariffs weaken EU growth → disinflationary.
If tariffs lift global goods prices → inflationary for EU.
Outcome hinges on external trade dynamics as much as internal policy.