Replying to Avatar Lyn Alden

As long as borrowing stress remains elevated, many asset prices are likely to remain choppy.

This is why the Fed is ending balance sheet reduction, but simply ending it is not necessarily sufficient. By 2026 they will likely go back to balance sheet expansion to put out this fire. Notably, it likely won't be very fast/large balance sheet expansion, but rather will be just enough to help settle this down, which makes a big difference.
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karlo 1mo ago 💬 2

I do not understand the mismatch between global M2 liquidity, which is trending upward, and the apparent problems with bank and repo market liquidity. I would have expected M2 liquidity to play a larger role in asset prices than the latter (which is why I was completely blindsided by the current carnage); why was this not the case?

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Lyn Alden 1mo ago

This is base liquidity, not broad liquidity. Broad liquidity is still pretty good, but AI stocks and gold have been the biggest beneficiaries this year rather than bitcoin.

A lot of people bought bitcoin last year due to expectations about a sovereign bitcoin reserve and things like that, and those sorts of expectations are being washed out.

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ByGawdd 1mo ago

Would you agree or at least acknowledge the market is seriously under pricing a btc announcement from this administration that would rock the markets? I think nobody is even talking about this possibility rn.