In the ever-evolving world of cryptocurrency, liquidity remains the backbone that keeps the market buoyant. Recent discussions between Raoul Pal, a prominent macro investor, and Michael Howell, CEO of CrossBorder Capital, have shed light on the precarious yet intriguing liquidity landscape facing cryptocurrencies. As of today, September 12, 2025, these experts suggest that the current liquidity cycle is approaching its twilight, with significant implications for crypto and other long-duration assets.
A Mature Liquidity Cycle
Howell’s assessment paints a vivid picture of a market on the brink of change. He describes the liquidity cycle, now about 34 months old, as mature yet still climbing. Traditionally, such cycles span five to six years, but current conditions suggest this one might extend until 2026. This extension, both Howell and Pal agree, is a result of policy engineering, with the US Treasury leaning heavily on short-dated bills over longer-term bonds.
This strategic move has ramifications for the broader financial ecosystem. By reducing the average duration of paper held by the private sector, the Treasury inadvertently boosts system liquidity. Banks and stablecoin issuers absorb these short-dated bills, effectively monetizing them and enhancing liquidity further. Pal describes this as a shift from balance-sheet expansion to a more complex “total liquidity” regime, where various market players, including crypto-native entities, become key channels of currency debasement.
Global Liquidity Dynamics
The global scene adds layers of complexity. While Europe and Japan are net-adding liquidity, China has taken decisive steps to ease financial conditions through its central bank’s toolkit. This has led to firming yields and term premia, signaling a potential shift from debt-deflation to reflation and a commodities up-cycle. A strong Chinese stimulus, as Howell points out, could bolster commodity markets, restoring a critical engine in the global business cycle.
Japan presents an interesting case. The selling in its bond market is concentrated at the ultra-long end, suggesting a rotation from bonds to equities. This is consistent with mild-inflation regimes that favor stocks. Howell speculates that Japan might be intentionally allowing some inflation to erode debt burdens or possibly acting under US Treasury influence to ease monetary policy.
In the UK and France, however, the picture is less rosy. These countries face rising term premia across the curve due to heavy issuance and weak growth. Howell suggests that monetization, in some form, is almost inevitable, whether it’s through QE or regulatory loosening.
The Dollar’s Role and Long-Duration Assets
The dollar remains a pivotal factor in this narrative. Despite its fundamental strength as the world’s primary collateral system, the current administration favors a weaker dollar cyclically to ease the refinancing of global dollar-denominated debt. This paradox, as Pal explains, results in currency debasement despite dollar inflows.
In this debasement regime, long-duration, liquidity-sensitive assets like crypto and technology equities are expected to lead. Howell emphasizes the need to invest in this “monetary inflation world,” with both men agreeing that crypto stands to benefit significantly. They view crypto as part of “log trend channels” that extend higher as cycles are elongated by policy engineering.
Challenges and Opportunities Ahead
Looking ahead to the 2026–2027 window, potential risks loom. The COVID-era extension of corporate and sovereign debt will require refinancing at higher coupons. Howell also warns of a cash-flow squeeze from a corporate capex boom, particularly in US tech companies investing heavily in infrastructure. This could drain liquidity even as profits rise, reminiscent of the late-1980s market sequence.
Despite these challenges, neither Pal nor Howell is bearish on the near-term outlook. They expect decent Fed liquidity to persist, avoiding repo stress and leaning on duration management. Through the end of the year, Howell predicts a steady market, with crypto continuing to ride the wave of monetary inflation.
At press time, the total crypto market cap stands at $3.95 trillion, reflecting the sector’s resilience amid macroeconomic shifts. As the liquidity endgame approaches, crypto remains a crucial expression of monetary inflation, poised to navigate the upcoming refinancing test with either a soft landing or a sharper turn.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
