Original author: arndxt

Original translation: AididiaoJP, Foresight News

Ordinary labor is irrelevant

The argument that "ordinary workers don't matter" is that under today's macroeconomic regime, a weak labor market won't halt economic growth. It simply forces the Federal Reserve to cut interest rates and inject more liquidity into the market. Productivity, capital spending, and policy support mean that capital continues to grow, even if individual workers suffer.

Individual workers are becoming less important to production as their bargaining power collapses in the face of automation and global capital spending.

The system no longer requires strong household consumption to drive growth, with capital spending dominating the calculation of GDP.

Workers’ plight directly feeds capital gains. For asset holders, labor market pain is good news.

The struggles of workers will not disrupt the economic cycle. The market no longer prices “the common man,” it now prices liquidity and capital flows.

Once again, the market is driven by: liquidity.

Global M2 has soared to a record high of $112 trillion. Over more than a decade of data, Bitcoin's long-term correlation with liquidity remains at 0.94, closer than stocks and gold.

When central banks ease policy, Bitcoin rises. When they tighten liquidity, Bitcoin suffers.

Let’s review history.

• 2014-15: M2 contracts and Bitcoin crashes.
• 2016-18: Steady expansion, BTC’s first institutional bull run.
• 2020-21: COVID liquidity floods in, Bitcoin goes parabolic.

Today, M2 is rising again, and Bitcoin is outperforming traditional hedges. We are once again in the early stages of a liquidity-driven cycle.

The 2025 TGA (Treasury General Account) replenishment poses a greater risk than in previous cycles because the overnight reverse repo buffer is effectively depleted. Every dollar raised now directly withdraws liquidity from active markets.

Cryptocurrencies will be the first to signal stress. A contraction in stablecoins in September will be a leading indicator, flashing red lights long before stocks or bonds react.

The resilience levels are clear:

• During periods of stress: BTC > ETH > altcoins (Bitcoin is best at absorbing shocks).
• Recovery period: ETH > BTC > altcoins (as fund flows and ETF demand re-accelerate).

Base case: A volatile September-November marked by tight liquidity, followed by a stronger move towards the end of the year as issuance slows and stablecoin growth stabilizes.

Looking at the bigger picture, the situation becomes clear:

• Liquidity is expanding.
• The US dollar is weakening.
• Capital spending is surging.
• Institutions are reallocating into risky assets.

But what makes this moment unique is the confluence of forces.

The Fed is caught between debt and inflation

The Federal Reserve is in trouble, debt repayment costs have become unbearable, and yet inflationary pressures remain.

Yields have plummeted, with the US two-year Treasury yield falling to 3.6%, while commodities are hovering near record highs.

We’ve seen this scenario before: in the late 1970s, when yields softened while commodities soared, leading to double-digit inflation. Policymakers had no good options then, and they have even fewer today.

This tension is bullish for Bitcoin. Throughout history, during every period of rupture in policy credibility, capital has sought safe havens in inflation-resistant assets. Gold captured these flows in the 1970s; today, Bitcoin is positioned as a hedge with higher convexity.

Weak labor force, strong productivity

The labor market tells a sobering story.

The quits rate has plummeted to 0.9%, ADP employment is below its long-term average, and confidence is waning. Yet, unlike in 2008, productivity is rising.

Driver: Capital expenditure super cycle led by AI.

Meta alone has pledged $600 billion in investments by 2028, with trillions flowing into data centers, reshoring, and energy transition. Workers are being displaced by AI, yet capital is growing in value. This is the paradox of the current economy: the real economy suffers, while Wall Street thrives. The outcome is predictable: the Federal Reserve cuts interest rates to cushion the labor market, while productivity remains robust. This combination injects liquidity into risky assets.

The quiet accumulation of gold

As stock markets falter and labor markets show cracks, gold has quietly re-emerged as a systemic hedge. Last week alone, $3.3 billion flowed into the GLD (SPDR Gold ETF). Central banks are the primary buyers: 76% intend to increase reserves, up from 50% in 2022.

Measured against gold, the S&P 500 is already in a hidden bear market: down 19% year-to-date and 29% since 2022. Historically, three consecutive years of underperformance of stocks relative to gold have marked long-term structural rotations (1970s, early 2000s).

But this isn't a frenzy driven by retail investors; it's the quiet accumulation of patient institutional money and strategic capital. Gold is taking on the stabilizing role once played by bonds and the US dollar. However, Bitcoin remains a higher-beta hedge.

The decline of the US dollar and the search for alternatives

The US dollar is experiencing its worst six months since the collapse of the Bretton Woods system in 1973. Historically, whenever Bitcoin diverges from the US dollar, a regime shift has followed. The US dollar index (DXY) fell below 100 in April, echoing the November 2020 drop that marked the start of a liquidity-driven cryptocurrency rally.

Meanwhile, central banks are diversifying. The dollar's share of global reserves has fallen to approximately 58%, and 76% of central banks plan to increase their gold holdings. Gold is absorbing this quiet capital allocation, but Bitcoin is poised to capture marginal flows, particularly from institutions seeking higher returns than passive hedges.

Recent pressure: replenishment of the Ministry of Finance account

Note: Treasury Account Replenishment refers to actions taken by the U.S. Treasury to increase the cash balance in its Treasury Account (TGA) at the Federal Reserve, in the process withdrawing liquidity from the financial system.

The Treasury account received nearly $500-600 billion in replenishment.

Ample buffers (RRP, foreign demand, bank balance sheets) mitigated the impact in 2023. These buffers have now disappeared.

Every dollar of replenishment is directly withdrawn from the market. Stablecoins and cryptocurrencies’ cash channels are the first to shrink, and altcoin liquidity dries up.

This means the next 2-3 months will be volatile. Expect BTC to outperform ETH, which in turn will outperform altcoins, but all currencies will feel the pinch and liquidity risk is real.

The Treasury account replenishment will weaken the trend, but it is just a storm in the rising tide. By the end of 2025, as issuance slows and the Fed policy turns dovish, Bitcoin is expected to test $150,000-200,000, supported not only by liquidity but also by structural fund flows from ETFs, companies and sovereigns.

argument

This is the beginning of a liquidity cycle in which capital appreciates while labor diverges, the dollar weakens while alternatives strengthen, and Bitcoin transforms from a speculative asset to a systemic hedge.

Gold will play its role, but Bitcoin, with its higher beta to liquidity, institutional access, and global accessibility, will be the leading asset of this cycle.

Liquidity determines destiny, and the next chapter of destiny belongs to Bitcoin.