Global Liquidity and Its Impact on Crypto Prices

What’s up, guys? It’s Dan from CoinB Trading. Today, we’re diving into one of the hottest macro topics in the crypto market right now—global liquidity and how it affects crypto prices. Before we jump in, remember: this is not financial advice. It’s just my personal analysis. Your view might be different, and that’s fine. Different perspectives are what make us all better traders.

They’re LYING TO YOU About GLOBAL LIQUIDITY!!

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Understanding the Liquidity Cycle

Global liquidity is essentially the amount of money circulating in the financial system. When liquidity expands, risk-on assets like stocks and crypto tend to rally. When it contracts, those same assets usually suffer.

One of the leading voices on this topic is Michael Howell, a global liquidity expert. For years, he has argued that liquidity peaks and troughs drive asset performance. In his framework:

• Liquidity rising → equities and crypto outperform.

• Liquidity flattening → commodities take over.

• Liquidity contracting → markets crash.

Based on Howell’s projections, we’re heading toward a liquidity peak around 2025–2026, after which a sharp contraction could trigger a major market downturn.

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The 2026 Debate: Peak or Pause?

In a recent interview with Raoul Pal, Howell hinted that the liquidity cycle may extend into early 2026, possibly March. Pal and others took this as confirmation of their thesis: that the current crypto bull cycle will climax in 2026.

But here’s the catch—while Pal was pushing the bullish case, Howell repeatedly cautioned that we are late in the cycle and should be preparing for turbulence.

In another interview with Jack Farley, Howell shared an important chart showing how different assets lead in different stages of the cycle. Crypto investors need to pay attention: as liquidity growth slows, commodities historically begin to outperform while risk assets weaken.

This suggests that while 2025 may still be strong for crypto, risks rise sharply heading into 2026.

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The ISM and Economic Growth Assumptions

Another piece of the debate is the ISM index, a measure of U.S. economic activity. Analysts like Pal and Julian Brigden argue that a rebound in ISM will drive further liquidity expansion, extending the bull run.

However, the data paints a different picture:

• The ISM composite index is hovering at stall speed.

• Growth looks weak, with no clear signs of reacceleration.

• Without a fiscal spending surge, it’s hard to see how liquidity could continue rising much longer.

Government spending has been a key driver of growth. But with high debt levels and bond yields already elevated, the U.S. has limited room to boost fiscal stimulus without triggering a bond market backlash.

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Could a Crash Be Engineered?

Here’s where things get interesting. Some argue that a market crash in late 2025 or early 2026 may be not just inevitable but even necessary.

A sharp downturn could:

• Drive investors into safe-haven U.S. bonds.

• Allow the Fed to cut interest rates more aggressively.

• Enable the U.S. government to refinance debt at lower rates.

• Create fiscal space for another round of stimulus ahead of the 2026 midterms.

This theory might sound conspiratorial, but it lines up with past patterns where crises were followed by policy pivots that re-ignited growth. If true, it could also shorten the crypto bear market that follows the peak.

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What This Means for Crypto Traders

So, how should traders think about this? A few takeaways:

1. Enjoy the liquidity expansion while it lasts. Risk assets like crypto typically thrive in this phase.

2. Watch for signs of flattening. When global liquidity growth slows, crypto gains may stall while commodities outperform.

3. Expect turbulence in 2026. Even if prices rally into the peak, the liquidity drain from higher debt refinancing will likely hit markets hard.

4. Plan for both outcomes. If fiscal spending surprises to the upside, the cycle could extend. If not, brace for volatility.

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Final Thoughts

The global liquidity cycle remains the single most important macro driver for crypto markets. While many are laser-focused on a 2026 cycle top, the real signal to watch is the transition point—when liquidity growth slows and commodities begin to outperform.

Whether the next big downturn comes in late 2025 or early 2026, traders who stay alert to liquidity trends will be better positioned to navigate the storm.

As always, do your own research, stay flexible, and manage your risk.