Gold rushes ahead of quantitative easing policies, while Bitcoin waits for liquidity (Part 2)

null Why Rate Cuts Have Failed to Boost Bitcoin: Liquidity Channels Are Blocked

To understand why Bitcoin reacts indifferently to rate cuts, it’s helpful to start with gold. Gold is a globally priced asset. While retail investors typically trade in grams, international pricing is based on troy ounces and tons. This global pricing structure makes macroeconomic factors so influential.

Bitcoin shares this characteristic. Additionally, its price is unified worldwide, meaning any serious analysis must begin with the U.S. macroeconomic situation.

The puzzle is obvious. The U.S. has entered a new rate-cutting cycle, yet Bitcoin’s price remains around $80,000, while gold prices continue to rise. Traditional theory suggests that low interest rates should benefit risk assets like stocks and cryptocurrencies. However, defensive assets are rising against the trend.

This contradiction can be explained by two structural factors.

“Middle Layer Blockage” Issue

The market focuses not on nominal interest rates but on real interest rates. With inflation remaining high, as long as inflation persists, even if policy rates are lowered, real interest rates will struggle to break through high levels.

From the perspective of the real economy, rate cuts have not translated into a more accommodative financial environment. Banks have not substantially eased lending standards. Companies remain reluctant to borrow. In other words, the intermediate link between policy and capital allocation remains blocked.

Meanwhile, the U.S. Treasury continues to issue大量新债券. In the second half of 2025, bond issuance for refinancing existing debt exceeds the liquidity released by rate cuts. The result may seem counterintuitive but is crucial: overall liquidity has not expanded; it has contracted.

There is currently not enough “available funds” to push Bitcoin prices higher.

This is a defensive rate-cutting cycle, not a growth cycle.

This rate-cutting cycle differs fundamentally from previous ones that fueled bull markets. The Fed’s rate cuts are not due to strong economic growth but because of rising unemployment, increasing corporate defaults, and unsustainable government debt servicing costs.

This is a defensive rate cut, mainly driven by recession fears and stagflation risks.

In this environment, capital behavior changes. Institutional investors prioritize survival over returns. Their first response is not to chase volatility but to reduce risk exposure and build cash buffers.

Despite Bitcoin’s long lifecycle, it remains one of the world’s most liquid high-risk assets. When market pressure increases, it is viewed as a liquidity source—a financial ATM. Risk aversion begins with cryptocurrencies, not ends there.

This logic is similar to the pattern of cryptocurrency price increases. During price expansion, funds flow into cryptocurrencies last; during rising uncertainty, funds flow out first.

In contrast, investors are waiting for real interest rates to fall sharply, with gold serving as a hedge against dollar depreciation.

Deeper Issue: The U.S. Debt Trilemma

U.S. interest payments have already surpassed defense spending, becoming the third-largest expenditure after Social Security and Medicare.

Washington essentially has only three options.

First, issue new bonds to pay off old bonds, rolling over debt indefinitely. Given that federal debt exceeds $38 trillion, this approach only worsens the problem.

Second, suppress long-term yields by shifting issuance to short-term notes, reducing average financing costs but not solving the fundamental imbalance.

Third, and most importantly, allow implicit default through currency devaluation. When debt cannot be repaid at its real value, it is repaid with devalued dollars.

This is the structural reason behind gold prices soaring to $4,500. Countries worldwide are hedging against the late-stage dollar credibility crisis.

Relying solely on rate cuts is insufficient. Many on Wall Street now openly state that to avoid collapse, the financial system needs sustained monetary expansion and controllable inflation. This creates a deadly vicious cycle: either printing money leads to currency devaluation or refusing to print causes defaults.

History shows this choice is inevitable. The Fed is unlikely to tolerate systemic collapse. Re-implementing quantitative easing and yield curve control now seems more about timing than probability.

2026 Strategic Outlook: From Liquid Darkness to Flood

Once this framework is understood, the divergence between gold and cryptocurrencies becomes logical. Both assets hedge against inflation, but timing is critical.

Gold signals the future trend of monetary expansion, while Bitcoin waits for confirmation.

In my view, the path forward unfolds in two phases.

Act One: Recession Shock and the “Gold Peak”

When recession indicators are fully confirmed—for example, U.S. unemployment exceeding 5%—gold prices may remain high or even surge further. At that point, gold will be seen as the safest asset.

However, Bitcoin may face its final decline. In the early stages of a recession, all assets are sold to raise cash. Margin calls and forced liquidations dominate market behavior.

History records this clearly. In 2008, gold fell nearly 30% before rebounding. In March 2020, gold dropped 12% within two weeks, while Bitcoin was halved.

Liquidity crises affect all assets. The difference lies in which assets recover first. Gold typically stabilizes and rebounds faster, while Bitcoin needs more time to rebuild market confidence.

Act Two: Fed Yielding and Bitcoin Liquidity Explosion

Eventually, rate cuts will be insufficient to cope with economic pressures. Economic tension will force the Fed to expand its balance sheet again.

This is the moment when the liquidity gate truly opens.

Gold prices may consolidate or move sideways. Funds will actively shift toward high-beta assets. Bitcoin, as the purest reflection of excess liquidity, will absorb this capital flow.

In this scenario, price movements are rarely gradual. Once momentum builds, Bitcoin’s price could change dramatically within months.

Explanation of Silver and Gold-Silver Ratio

Silver’s rally in 2025 will be driven mainly by two factors: its historical correlation with gold and its industrial demand. Artificial intelligence infrastructure, solar energy, and electric vehicles all heavily depend on silver.

By 2025, inventories at major exchanges—including the Shanghai Futures Exchange and the London Bullion Market Association—will reach critical levels. During bull markets, silver often outperforms gold, but in bear markets, silver’s downside risk is higher.

The gold-silver ratio remains a key indicator.

When silver prices are above $80, they are relatively cheap historically. Below $60, silver is relatively expensive compared to gold. Below $50, speculative excess often dominates.

Currently around $59, this signals the market will shift toward gold rather than actively accumulating silver.

Long-term Perspective: Different Leaders, Same Goal

Setting aside the specific timing of 2026, the long-term conclusion remains unchanged. Gold and Bitcoin both show an upward trend against fiat currencies.

The only variable is leadership. This year belongs to gold; the next phase belongs to Bitcoin.

As long as global debt continues to expand and monetary authorities rely on currency devaluation to ease pressure, scarce assets will outperform others. In the long run, fiat currencies are always the only assets that continuously depreciate.

What matters now is patience, data, and discipline. The transition from gold dominance to Bitcoin dominance will not be announced openly—it will manifest through liquidity indicators, policy shifts, and capital rotations.

I will continue to monitor these signals.