Global Liquidity Cycle Peaks: Crypto Late Stage, Not New Start

Michael Howell, founder of CrossBorder Capital, brings a distinctly market-focused perspective to liquidity analysis that diverges sharply from conventional measures like M2. His definition centers on “the flow of money through global financial markets” rather than bank deposits in the real economy. This approach “looks at the repo markets, it considers shadow banking,” and essentially “begins where conventional M2 definitions end.” On his Global Liquidity Index, the scale of this financial market liquidity has doubled from under $100 trillion in 2010 to “just under $200 trillion” today, representing an enormous expansion of market-fueling capital over the past decade and a half.

What matters most to Howell isn’t the absolute level of liquidity but its momentum, which follows a remarkably stable 65-month cycle he interprets as a debt-refinancing rhythm. His research reveals that capital markets have transformed from vehicles for funding new investment to mechanisms primarily for rolling over existing obligations. “Something like 70 to 80% of transactions… are debt refinancing transactions. They’re not about raising new capital,” he explained during his Bankless podcast appearance. This creates a symbiotic relationship where “debt needs liquidity for rollovers but actually liquidity needs debt,” since approximately three-quarters of global lending is now collateral-backed.

Howell’s framework centers on tracking a debt-to-liquidity ratio for advanced economies—the total public and private debt stock divided by the pool of refinancing liquidity. This ratio typically averages about two times and tends to mean-revert over time. When the ratio drops well below this level, liquidity becomes abundant relative to debt, creating conditions where “you get asset bubbles.” Conversely, when the ratio rises significantly above two times, “you start to see a stretched debt-liquidity ratio and you get financing tensions or refinancing tensions and you can see those basically morph into financial crisis.”

According to Howell, we’re currently “transitioning, unfortunately, out of a period that I’ve labeled the everything bubble”—a phase where liquidity was abundant relative to debt following repeated rounds of quantitative easing and emergency support. The COVID era deepened this imbalance by encouraging borrowers to “term out” debt at near-zero rates. “A lot of the debt that then existed was refinanced back into the late 2020s at low interest rates,” he noted, creating what he describes as a visible “debt maturity wall” later this decade where heavy refinancing needs are coming due into a much tighter funding environment.

In the shorter term, Howell is closely monitoring the interaction between Federal Reserve liquidity operations, the rebuilding of the US Treasury General Account, and growing stress in repo markets. He points to concerning behavior in SOFR (Secured Overnight Financing Rate), which “you’d actually expect to trade below Fed funds” because it is collateralized, but has repeatedly traded above its normal range. “We’ve started to see these repo spreads blow out,” he warned, adding that “it’s not really the extent of these spikes… it’s really the frequency that’s the most important factor.”

These repo market stresses signal potential systemic vulnerabilities. If trades begin to fail and leveraged positions start to unwind, Howell cautions that “it’s going to turn quite ugly and that could be the start of the end of the cycle.” Within his four liquidity regimes—rebound, calm, speculation, and turbulence—he places the United States firmly in “speculation,” with Europe and parts of Asia in “late calm.” Historically, he notes that early and mid-upswings favor equities and credit, peaks favor commodities and real assets, while downswings favor cash and then long-duration government bonds.

Howell’s analysis places crypto in a unique position that straddles traditional asset categories. “Crypto generally behaves a little bit like a tech stock and a little bit like a commodity,” he observed. For Bitcoin specifically, his research indicates that “about 40–45% of the drivers… are global liquidity factors,” with most of the remainder split between gold-like behavior and pure risk appetite. This significant exposure to global liquidity conditions makes crypto particularly sensitive to the turning liquidity cycle.

The popular notion of a hardwired four-year Bitcoin halving cycle finds little support in Howell’s work. “I don’t really see any evidence of that four-year cycle,” he stated, arguing that the 65-month global liquidity and debt-refinancing cycle represents the more robust driver of crypto market movements. With that cycle projected to peak around now, crypto looks “late stage in the crypto cycle. So it could be over but it might not be.” This positioning suggests crypto is nearer the end of its current cycle rather than at the beginning of a fresh bull market.

Despite tactical caution, Howell maintains a structurally bullish long-term view. “The trend towards monetary inflation… is slated to continue for another two or three decades at least,” he asserted. Against this backdrop, he argues investors “have to have” monetary-inflation hedges, emphasizing that “it’s not Bitcoin or gold. [It’s] Bitcoin and gold.” His current positioning reflects this dual perspective: “We’ve not turned bearish risk-off yet, but we are not bullish short-term.” He suggests that upcoming weakness in risk assets might present “a good time to pick up some more” of those long-term inflation hedges, positioning for the structural monetary trends he expects to persist for decades.