Bankless Podcast Episode Summary

Episode: The Real Crypto Cycle: What Happens When Global Liquidity Peaks | Michael Howell
Date: November 24, 2025
Guest: Michael Howell
Host: Bankless

Main Theme & Purpose

This episode dives deep into the concept of global liquidity as the dominant driver of financial asset cycles, from equities to crypto. Michael Howell, a renowned expert on liquidity flows and author of "Capital Wars," breaks down how liquidity cycles underpin asset bubbles, crashes, and the ongoing saga of debt refinancing in a modern financial system increasingly shaped by central bank interventions. The discussion covers the mechanics of global liquidity, its cyclical nature, its relationship to crypto and gold, and how shifting global monetary regimes may soon shape the future of investing.

Key Discussion Points & Insights

1. Understanding Global Liquidity (00:00–07:00)

• Genesis of the Insight: Michael's background at Salomon Brothers, observing money move across trading desks, revealed that “in financial markets, there are no unrelated events” ([01:54] A).
• Global liquidity here is distinct from traditional money supply (like M2/M3); it's “money at the fringes of the financial system…money in financial markets. It looks at the repo markets, shadow banking, international securities markets…” ([05:32] A).
• Michael's firm tracks these flows across 90+ countries, aiming to provide the definitive view of liquidity globally.

2. The Global Liquidity Index (GLI) & 65-Month Debt Cycle (05:32–14:49)

• GLI is not M2/M3 — it measures financial market liquidity, not real economy cash.
• The GLI has more than doubled since 2010 (from under $100T to just under $200T).
• Liquidity cycles exhibit a robust 65-month rhythm, corresponding to the average maturity of global debt:

  "What you're looking at here is a debt refinancing cycle...with a period of 65 months—the average maturity of world debt." ([07:00] A)

• The cycle last bottomed in late 2022, is peaking ~late 2025, and is showing early signs of turning down.
• Central Banks’ Role: High global liquidity needs 1) central banks fueling the system, and 2) a not-too-strong real economy. That “cocktail for strong global liquidity and asset markets...is not what we have right now” ([11:37] A).

3. Why Liquidity Keeps Climbing (15:46–24:50)

• Liquidity’s core function: rolling over/refinancing debt.
• “70–80% of financial market transactions now are debt refinancing— not raising fresh capital” ([15:46] A).
• The global financial system is now a debt refinancing machine. Debt needs liquidity, but “liquidity needs debt” (for collateral).
• The “Everything Bubble”: We are transitioning out of a period of abundant liquidity and into one where debt maturities and central bank tightening create potential stress points.

  “We are transitioning out of a period that I’ve labeled the everything bubble…liquidity has been abundant relative to debt.” ([20:24] A)

4. Debt Maturity Wall & Asset Bubbles vs. Crises (20:24–26:07)

• When the debt-to-liquidity ratio dips below 200%, bubbles emerge (Japan ‘89, Dotcom, Housing, Everything Bubble). Above 200%, crises emerge.
• Current Position: End of an asset price appreciation cycle, with rising debt maturity “wall” and waning central bank support—risk of entering crisis territory.

5. Cycles vs. Trends: Navigating the Current Environment (26:07–35:12)

• The trend toward monetary inflation is strong and likely to continue for decades, driven by large welfare and defense burdens:

  “The only route policymakers really have is to print money or monetize that debt. And that creates monetary inflation. We all need protection against monetary inflation.” ([26:28] A)

• In the shorter-term cycle, watch for repo market stress; recent moves by the Fed/Treasury suggest liquidity is being withdrawn, potentially heralding turbulence.

6. Asset Allocation Through the Cycle (35:12–42:05)

• Howell’s schematic for asset allocation by cycle phase:
  • Rebound/Calm: Equities, tech, credits.
  • Speculation: Commodities, real assets.
  • Turbulence: Cash, long-duration bonds, defensives.
• Recent cycle has followed the playbook: tech and financials have led, commodities are following, and fixed income starts to look attractive near cycle troughs.

7. Global Liquidity’s Impact on World Wealth & Crypto (41:08–47:06)

• Since 2010, correlation between global liquidity growth and multi-asset world wealth (equities, bonds, gold, crypto, real estate) has strengthened.
• Crypto Positioning:

  “Crypto generally behaves a little bit like a tech stock and a little bit like a commodity...its trend is like gold, its cycle is like tech.” ([43:11] A) “Something like 40–45% of the drivers of Bitcoin are global liquidity factors; 25% gold; 25% risk appetite (like Nasdaq).” ([43:51] A)

  • Bitcoin and gold: positive long-term correlation, negative short-term correlation—think “bitcoin as the dog; gold as the owner” ([45:46] A).

8. The Ever-Rising Liquidity “Supercycle” & Monetary Regimes (47:06–56:10)

• Global liquidity keeps rising because governments have little choice but to keep refinancing and inflating.

  “None of the US will ever default. If they’re in a bind, they will continue to print money. There’s really no alternative.” ([58:55] B)

• Next battleground: US dollar block (stablecoins, treasuries) vs. China (gold backing).

  “If you look at the world, it's cleaving into two monetary systems...America’s technology-backed system vs. China’s gold-backed credibility.” ([54:03] A)

• Stablecoins seen as a threat by Europe and especially China, prompting both to shore up gold reserves and potentially move toward more gold-backed frameworks.

9. Investment Implications and Future Outlook (64:29–72:40)

• Tactical view: As cycle inflects downwards, reduce risk in portfolios; be cautious, especially with risk-on assets like equities and crypto.
• Strategic view: “It’s not bitcoin or gold. It’s bitcoin and gold.” ([64:57] A) Allocations to both are necessary for long-term protection against monetary inflation.
• Howell’s math: If gold keeps pace with US federal debt, expect $10,000/oz by mid-2030s, $25,000/oz by 2050. Bitcoin has outpaced, so upside could be even greater. ([66:31] A)
• Howell sees little evidence for a four-year “crypto cycle”:

  “I don’t really see evidence of the four-year cycle...These are longer, five-to-six year debt refinancing cycles—which now may be coinciding with halving cycles, but are not driven by them.” ([68:42] A)

• Portfolio construction: Core holdings in inflation hedges (bitcoin, gold, real estate, quality equities); tactical overlays to manage cycle risk.

10. Broader Context and Caveats (72:40–79:09)

• Cycles trump narratives: “It’s never different this time. Everything goes in cycles” ([73:28] A), referencing past bubbles in Japan, tech, biotech.
• Liquidity is not a theory of everything: It guides cycles and asset allocation, but not micro selection or every outcome (e.g., idiosyncratic company performance or geopolitics).

Notable Quotes & Memorable Moments

• On why liquidity matters:

  “In financial markets, there are no unrelated events.” ([01:54] A)

• On system’s design:

  “The modern financial system is a debt refinancing system.” ([15:46] A)

• On monetary inflation:

  "The only route that policymakers really have is to print money or to monetize that debt. And that creates monetary inflation. And we all need protection against monetary inflation." ([26:28] A)

• On global liquidity supercycle:

  “None of the US will ever default...they will continue to print money. There’s really no alternative to that.” ([58:55] B)

• On crypto's multiple personalities:

  “Crypto generally behaves a little bit like a tech stock and a little bit like a commodity...It's really a mix of those two factors.” ([43:11] A)

• On coming monetary bifurcation:

  “If you look at the world, it's cleaving into two monetary systems. One is a US-dollar based system...and China, backing its system with gold. Trust our technology for America, trust our gold for China.” ([54:03] A)

Timestamps for Important Segments

| Segment | Start | Topic | |-----------------------------------|------------|-----------------------------------------------------------------------| | Salomon Brothers insight, money flows | 01:54 | Why understanding global liquidity is foundational | | GLI explained, debt cycles | 05:32 | Definition, data sources, 65-month refinancing cycle | | The everything bubble and Fed QE | 20:24 | Emerging risks, debt maturity “wall” and asset bubbles | | Asset allocation through the cycle| 35:12 | Rebound/calm/speculation/turbulence phases, traffic light chart | | Crypto’s position in cycle | 43:11 | Tech-stock vs commodity properties, how liquidity drives Bitcoin | | Stablecoin vs China’s gold move | 48:29 | Two monetary blocks, capital war, future of reserves | | Gold, Bitcoin, & long-term inflation| 64:29 | Price projections, portfolio strategy | | Cycles trump narratives (AI/tech) | 73:28 | Everything reverts to cycle, it's “never different this time” | | Practical investor takeaways | 78:49 | What to watch next; focus on repo markets, Main Street vs Wall Street |

Conclusion & Investor Takeaways

• Cycle position: Global liquidity is rolling over; repo stress is a red flag, signaling late-stage in the current upcycle.
• Portfolio positioning: Hold core allocations in bitcoin, gold, prime real estate, and quality equities for inflation protection; take tactical profits and reduce risk on overextended assets as the cycle turns.
• Watch list for coming months: All eyes on repo markets for the first crisis signals, and on further bifurcation of global monetary regimes.
• Long term: Expect ongoing monetary inflation; the world’s capital war is shifting to a tech-vs-gold, US-vs-China paradigm.

For more:

• Michael Howell’s Substack: Capital Wars
• His institutional research: crossbordercapital.com

As always, this is not investment advice. Know the risks before you allocate capital.