Bitcoin Brief

Sup, freaks.

Bitcoin can be the right answer to monetary debasement and still trade like a high-beta liquidity asset while the credit cycle moves against it.

Michael Howell is putting numbers around that tension today.

Let's get into it.

LEAD STORY

Bitcoin's Liquidity Winter Is Not Over Yet

Bitcoin is not trading in a vacuum.

The network keeps producing blocks. The supply schedule keeps doing what it is supposed to do. The monetary case has not changed. Yet bitcoin has had a miserable 2026, and every rally has struggled to attract enough demand to break the market out of its stupor.

Michael Howell's latest Capital Wars report offers a blunt explanation: the global-liquidity cycle peaked at the end of the third quarter of 2025, liquidity growth in dollar terms is still slowing, and the next durable upswing may remain several months away.

That does not mean bitcoin is broken. It means the firehose is still closing.

Howell's framework reaches beyond the Federal Reserve's balance sheet. It tries to capture worldwide central-bank liquidity, private credit, collateral conditions, and the cross-border balance-sheet capacity that lets investors add risk. His argument is that crypto markets respond to that global pool far more violently than traditional assets do.

In Howell's proprietary model, a basket composed of 60% bitcoin, 30% ether, and 10% solana currently has a loading near 11 times changes in global liquidity, with an R-squared above 32%. Fed liquidity alone produces an R-squared of only 0.02 in his comparison. His longer-run estimate puts bitcoin's average liquidity beta at 9.5 times.

Those are Howell's numbers, not laws of nature. The model uses six-week changes around long-term trends and advances global liquidity by 13 weeks. The basket mixes bitcoin with two shitcoins. The sample begins in 2015, which gives us relatively few complete monetary cycles. Advancing the liquidity series can reveal a real lead, but it can also flatter a relationship if the specification was selected after looking at the data.

Treat it as a useful lens, not a trading oracle.

The lens still explains a lot. Bitcoin sits at the far end of the risk curve because it trades around the clock, settles quickly, carries no earnings floor, and attracts pools of capital that can move in and out without waiting for a banker to open a branch. When collateral values rise and credit becomes plentiful, that liquidity can hit bitcoin with force. When balance sheets contract, the same mechanism runs backward.

Staring only at the Fed balance sheet can produce bad macro analysis. The Fed matters, but so do Treasury operations, commercial-bank balance sheets, overseas central banks, cross-border dollar credit, collateral haircuts, and the private financial plumbing that determines whether money can actually move into risk assets.

Bitcoin was trading around $64,379 this morning. U.S. spot bitcoin ETFs have recorded four consecutive outflow sessions totaling $526.7 million. Those figures do not prove Howell's model, but they fit his tactical message: the liquidity tailwind has not returned.

The mistake would be to confuse a cyclical headwind with a refutation of the monetary thesis.

The BLS food-at-home index rose from 241.581 in January 2019 to 321.446 in June 2026, a 33.1% increase. June's year-over-year food-at-home inflation rate slowed to 2.7%, but the lower rate does not put the grocery bill back where it was. It merely means the damage is compounding more slowly.

Most inflation commentary deliberately mangles this distinction. People experience the price level. Economists and politicians celebrate the rate of change.

A family does not care that eggs, meat, dairy, coffee, and cereal are rising at a more acceptable pace after the purchasing power of its paycheck has already been shredded. The family still has to pay the new price. The debasement is embedded in the base.

That cumulative loss of purchasing power is the long-run case for bitcoin. Governments remain overindebted. Political constituencies are organized around benefits they will not surrender. Central banks will continue to treat currency debasement as the least visible way to reconcile promises with resources. The units in your bank account may remain constant while the claims those units can command deteriorate.

Bitcoin gives people an asset no central bank can print and no finance ministry can dilute. That does not make its dollar price rise every month. It gives savers an escape hatch from the long-run direction of fiat money.

Howell is tactically cautious and structurally bullish for the same reason. A liquidity contraction can punish bitcoin today while setting up the political response that strengthens bitcoin's monetary case tomorrow. Tight conditions break leveraged balance sheets. Governments and central banks eventually respond with more liquidity. The next intervention starts another turn of the wheel.

Patience matters here. Leverage can liquidate a correct thesis before the cycle turns. A bitcoin holder who understands the difference between saving and speculating can survive a drawdown. A trader financing a high-beta position with short-term debt may not.

The network does not need a liquidity forecast to keep working. Your portfolio probably does.

SIGNAL

The AI Bubble Call Is Ignoring Hyperscalers' Hidden Pricing Power

Gavin Baker thinks credit markets are drawing the wrong conclusion from the AI buildout.

Baker argues that spot GPU rental prices are at least twice the rates embedded in older contracts. If expiring contracts reprice higher while demand keeps growing, hyperscalers are currently underearning relative to the capacity they have installed. His model has hyperscaler operating-cash-flow growth accelerating from 31% in the first quarter to 50% in the second.

Those are Baker's estimates, not guidance, and spot prices do not guarantee contract repricing.

The Hut 8 headlines show how the numerator gets inflated. Hut 8 disclosed $19.6 billion across two 15-year leases at Beacon Point. The figure reaches $50.2 billion only if every renewal option is exercised over 30 years. NVIDIA is the public technology partner; reports describing a larger tenant or backstop role rely on unnamed sources.

John Arnold adds the layer split. Chinese open models can pressure American labs while increasing demand for American power, datacenters, memory, networking, and accelerators. The real constraint may be physical: getting the power online.

Lower Inflation Does Not Put the Grocery Bill Back

The June CPI report says food-at-home prices rose 2.7% over the prior year. That sounds manageable until you widen the window.

The same BLS series is up 33.1% since January 2019. A grocery basket that cost $100 then costs roughly $133 now. A slower inflation rate preserves that higher base. It does not reverse it.

People remain angry because economists are describing the speed of the car. The family is looking at how far it has already traveled in the wrong direction.

Inflation will not be structurally fixed by asking the institution that creates the units to show more restraint. It will be disciplined when more people can save in a permissionless form of money that politicians and central bankers cannot debase.

The Housing Index Is Missing the Condo Stress

The most popular U.S. home-price index has a large blind spot. The Case-Shiller methodology excludes condominiums, co-ops, apartments, and multifamily properties.

Melody Wright argues that the excluded condo market is where stress is becoming harder to hide. In her latest work, Redfin data show national condo sales in March were 43.2% below their June 2021 peak, while median condo prices had fallen 4.2% from January 2026. Those figures come from Wright's reconstruction of a discontinued Redfin series and should be read as her analysis, not a new government release.

Fannie Mae is retiring Limited Review, pushing most previously eligible projects into Full Review for applications dated August 3 or later. A 15% minimum reserve allocation begins under Full Review in January 2027 unless a qualifying reserve study supports another amount.

The rules can protect Fannie from underfunded buildings while making marginal projects harder to finance. ICE says June foreclosure starts reached a six-year high and active foreclosures rose to 0.53% of mortgages. Overall delinquency remains below June 2019. The direction matters, especially in the segment the headline index ignores.

Private Credit Is Sending a Bad Signal

Two credit executives are moving toward the exits while the market is arguing about marks.

Blackstone Secured Lending Fund disclosed that Jonathan Bock resigned as co-CEO on July 20. The filing explicitly says his departure was not caused by a disagreement over the fund's operations, policies, or practices.

Separately, Bloomberg reported that Phil Tseng is preparing to leave BlackRock TCP Capital after losses on soured loans and scrutiny of the fund's valuation practices. Tseng remained a BlackRock employee when Bloomberg published, and the timing of his departure had not been finalized.

These are separate events at separate funds. Neither proves a systemic collapse. They still belong on the same dashboard.

Private credit lets lenders hold loans that do not trade every day. That can protect patient capital from noise and delay price discovery when borrowers weaken and managers control the marks. Leadership turnover deserves attention when it arrives beside losses, markdowns, and valuation questions.

Public markets humiliate you in real time. Private markets can let the argument drag on until someone has to sell.

⚡ FREEDOM TECH CORNER

FROST Takes the Hot Key Out of the Ecash Mint

Cashu gives users private bearer payments, but the mint normally holds the backing bitcoin and controls the keys required to redeem those tokens. One compromised server can become one very expensive point of failure.

Calle's experimental Bark work uses FROST to replace one complete wallet key with threshold control. A group such as three of five signers holds key shares and cooperates to produce one ordinary Schnorr signature. The bitcoin and Ark layers see a normal signature. They do not see the size or membership of the signing group.

For a Bark-powered Cashu mint, that can distribute control of the Ark VTXOs backing the ecash. One operator or thief can no longer drain the reserve wallet alone. A quorum must cooperate to move reserves, pay a Lightning invoice, or exit the Ark position.

The improvement is meaningful. It is not a trustless mint.

FROST on the Bark wallet does not automatically distribute Cashu's blind-signature issuance keys. It does not replicate the database that tracks spent proofs. It does not stop a dishonest mint from issuing more ecash than it can redeem, censoring users, or going offline. Ecash holders still possess claims on the mint and cannot unilaterally turn a Cashu token into an on-chain UTXO.

The clean progression is straightforward: replace the single hot reserve key with threshold custody, publish auditable reserves and liabilities, then work toward threshold control of issuance and state.

Calle's demo advances the first step. His own description remains appropriately cautious: "I think it's working." The FROST branch is not visible in the canonical public Bark mirror, so this is an experiment, not a production release.

Harder to rug is worth building. Trustless is a much higher bar.

DATA SNAPSHOT

As of July 29, 2026, 8:12 a.m. ET

See you tomorrow. This is not investment advice. Do your own research.

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