Crypto Has Entered Late-Cycle Territory, Says Global Liquidity Veteran
Overview
Michael Howell, a global liquidity specialist, recently shared insights on the Bankless podcast regarding the current state of risk assets, including cryptocurrencies. He posits that the post-global financial crisis “everything bubble” is approaching its conclusion, indicating that the crypto market is late in its cycle rather than at the beginning of a new one.
Key Insights from Howell’s Analysis
Howell defines liquidity in a unique manner, distinguishing it from traditional metrics like M2. He describes liquidity as the flow of money through global financial markets, emphasizing its role in areas such as repo markets and shadow banking. Howell indicates that the total global liquidity has doubled over the past decade and a half, moving from under $100 trillion to just under $200 trillion.
He highlights the importance of liquidity momentum over sheer levels. Howell identifies a stable 65-month global liquidity cycle, which he interprets as a rhythm of debt refinancing. He notes that a significant percentage of transactions in capital markets are now related to refinancing rather than raising new capital. Howell stresses that liquidity is essential for debt rollovers, and conversely, debt is necessary for liquidity, as a considerable portion of global lending is collateral-backed.
To illustrate systemic tensions, Howell tracks a debt-to-liquidity ratio for advanced economies. He describes how this ratio typically averages about two times and tends to revert to the mean. When the ratio falls significantly below this level, liquidity is abundant, leading to asset bubbles. Conversely, when it rises significantly above, it indicates stretched debt-liquidity conditions, potentially resulting in financial crises.
Currently, Howell observes a transition from what he calls the “everything bubble,” a phase characterized by abundant liquidity relative to debt. He attributes the exacerbation of this imbalance to the COVID era, which encouraged borrowers to refinance debt at low-interest rates, creating a “debt maturity wall” later in the decade.
Short-term, Howell is monitoring the dynamics of Federal Reserve liquidity operations, the rebuilding of the US Treasury General Account, and stress in repo markets. He notes that the Secured Overnight Financing Rate (SOFR) has been trading above its expected range, which raises concerns about the frequency of these occurrences. He warns that if leveraged positions unwind, it could lead to significant market turmoil.
In terms of market positioning, Howell categorizes the US within a “speculation” phase, while Europe and parts of Asia are in a “late calm.” Historically, different phases favor different asset classes, with downswings typically benefiting cash and long-duration government bonds.
Impact on the Crypto Market
- Howell suggests that cryptocurrencies behave similarly to both tech stocks and commodities.
- Approximately 40-45% of Bitcoin’s price movements are influenced by global liquidity factors, with the remainder linked to gold-like behavior and risk appetite.
- Howell expresses skepticism about the widely held belief in a four-year Bitcoin halving cycle, advocating for the significance of the 65-month liquidity and debt-refinancing cycle as a more reliable driver.
- He characterizes the current crypto market as late stage, suggesting that it may be nearing its peak.
- Howell believes that the trend toward monetary inflation is likely to persist for several decades, highlighting the need for inflation hedges, including both Bitcoin and gold.
- While he remains cautious about short-term bearish trends in risk assets, he indicates that upcoming market weaknesses could present opportunities for long-term investment in these hedges.
Updated: 11/26/2025, 4:30:14 AM
