Crypto Enters 'Late-Cycle' Phase, Warns Global Liquidity Veteran
Global liquidity specialist Michael Howell has issued a cautionary outlook for risk assets, including cryptocurrencies, suggesting that the post-Global Financial Crisis "everything bubble" is winding down. Speaking on the Bankless podcast, Howell posits that global refinancing dynamics indicate crypto is in a late-stage cycle, rather than at the cusp of a new beginning. Howell's analysis hinges on his unique definition of liquidity, which deviates significantly from traditional measures like M2. He defines liquidity as "the flow of money through global financial markets," encompassing repo markets and shadow banking, where conventional M2 definitions typically conclude. His Global Liquidity Index, which stood at under $100 trillion in 2010, now approaches $200 trillion – a doubling in a decade and a half.
Howell Flags Liquidity Peak
Crucially, Howell emphasizes the momentum of this liquidity over its sheer volume. He identifies a consistent 65-month global liquidity cycle, which he interprets as a rhythm of debt refinancing. He argues that capital markets are predominantly focused on debt refinancing (70-80% of transactions) rather than generating new capital. In this environment, "debt needs liquidity for rollovers, but actually liquidity needs debt," creating an ironic cycle where old debt finances new liquidity. He tracks a debt-to-liquidity ratio for advanced economies, noting its tendency to mean-revert around two times. When this ratio dips significantly below two, liquidity is abundant, leading to asset bubbles. Conversely, a substantial rise above this average signals financial tensions and potential crises. Currently, Howell notes a transition out of an "everything bubble" phase, characterized by ample liquidity relative to debt, largely fueled by quantitative easing and low-interest-rate debt refinancing post-COVID. This has set the stage for a "debt maturity wall" later this decade, requiring heavy refinancing in a much tighter funding landscape.
The Impact On The Crypto Market
Howell characterizes crypto as straddling the categories of tech stocks and commodities. For Bitcoin specifically, he attributes 40-45% of its drivers to global liquidity factors, with the remainder split between gold-like behavior and pure risk appetite. He dismisses the popular four-year Bitcoin halving cycle as a primary driver, instead advocating for his 65-month global liquidity/debt-refinancing cycle as the more robust underlying force. Given this cycle is projected to peak around the current period, he places crypto firmly in a "late stage" territory. While acknowledging the potential for continued activity, he advises caution, suggesting that upcoming weaknesses in risk assets could present opportune moments to acquire long-term inflation hedges like Bitcoin and gold. The total crypto market cap currently stands at $2.96 trillion, hovering above its 100-week Exponential Moving Average (EMA).
