Talking to cyclical research experts: Bitcoin is looking for a bottom and will enter the most seasonally bullish period of the year

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Original text: David Lin

Compiled & Organized: Yuliya, PANews

Global financial markets are at a critical juncture, with the AI boom driving stocks to new highs, but high government debt and interest rate uncertainty continue to pose risks. Are we in a “bubble of everything”? When will this bubble burst? To answer these questions, David Lin, a well-known YouTuber, invited Dr. Richard Smith, chairman of the board and executive director of the Cycle Research Foundation (FSC) in this episode. Dr. Smith uses his deep cyclical analysis theory to analyze the future direction of core assets such as Bitcoin, gold, the stock market, and global debt. He believes that market liquidity is at the heart of all current problems, and the “fiscal leadership” strategy adopted by the U.S. government to maintain low interest rates is profoundly affecting every corner of the world, from cryptocurrencies to traditional stock markets. What’s more, he gave a clear prediction at a point in time: a deeper crisis caused by debt may come in mid-2026. PANews has compiled the conversation.

Bitcoin bottom coming? It’s all about “fiscal leadership” and liquidity

Host: Bitcoin has been extremely volatile in recent weeks, falling from its highs to around $80,000 at one point, well below the high set last year. There is a lot of debate about whether Bitcoin’s four-year cycle is over, or whether the “halving” narrative is still the main driver of prices, as it has been in the past few years. What do you think about Bitcoin’s current state and future movements?

Richard: Bitcoin reveals many deep problems in the current market. Our foundation has been keeping a close eye on Bitcoin. According to our cycle detection technology, we have previously made it clear that the market will undergo a correction when the price of Bitcoin peaked.

But that doesn’t mean it won’t reach new highs. I would like to emphasize that the price of Bitcoin reacts most quickly to the amount of money (i.e. liquidity) in the entire financial system. Therefore, its price change can be seen as an early signal of the overall market situation. ** An analyst named Michael Howell explained it well, saying that the core of today’s market is actually “debt refinancing”. There is some truth to the idea that the stock market is only as good as the company’s business and cryptocurrencies are dependent on technological innovation, but the more important fact is that we live in an era of “fiscal dominance”. This means that the U.S. government has huge debts and must constantly borrow new debts to repay old debts. But if the interest rate is too high, the government will pay too much interest to afford. Therefore, the most important task of the U.S. government at present is to do everything possible to keep interest rates low. This need to manage debt is now the most important force affecting all financial markets.

Let me show you through our cycle analyzer.

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The blue line is the price of Bitcoin. We saw a high of about $125,000 in October 2025, and our cyclical model predicted a pullback in Bitcoin at that time. At present, this pullback seems to be coming to an end. I need to say that cyclical analysis tells us about the “direction of the wind”, it is not the only decisive force in the market, but we must know which direction the wind is blowing.

Currently, the cyclical model shows that Bitcoin is looking for a bottom. And there are some fundamental factors that support this view. The Fed made it clear at its recent meeting that it was ready to stop quantitative tightening (QT) (PANews Note: The Fed stopped QT on December 1). This is a very important signal because:

• Money market funds no longer borrow money from the Federal Reserve
• They don’t get interest
• Liquidity in the system becomes too tight

When liquidity is too tight, the Fed must stop QT and start injecting liquidity – which means that the “invisible version of quantitative easing (QE)” is about to return. The Fed must inject more liquidity into the system. They have made it clear that they will no longer just roll Treasury bonds off the balance sheet when they mature, but will buy new short-term Treasury bonds to replace the old ones.

Currently, the Treasury Department is also mainly selling short-term Treasury bonds to maintain financing because they cannot afford the high interest rates on long-term debt. All of this tells me that Bitcoin, as the most liquidity-sensitive asset, has bottomed out cyclically, coinciding with the news we’ve heard about rate cuts, a new Fed chairman who may be more dovish than Powell, and the return of rate cuts in December to the table. Behind all this is the core task of the US government: the entire system must be maintained, because the dollar and US debt are already “too big to fail”.

Moderator: Richard, I have a data from prediction market Kalshi here. On the question of whether Bitcoin can break through $100,000 again this year, the current opinion of market participants is about 55%. How do you see this as a cyclical analyst?

Richard: I don’t have in-depth research on prediction markets, and $1.45 million in trading volume is not large relative to the trillion-dollar Bitcoin market. But for me, the most important thing is:

Cycle peak signals are accurate: Our cycle model predicts previous tops well.

• Cyclical pressure released: The model shows that the downward pressure from the cycle has been largely released, and now is a typical period for market participants to change their views.
• Pessimistic Market Sentiment: We are now seeing a lot of negative news about Bitcoin, such as Michael Saylor’s Strategy stock price pulling sharply, which is usually a signal that market sentiment has bottomed out.
• Macro liquidity improvement: The Fed stopped QT and may move to some form of “invisible QE”, which is good for liquidity and will benefit Bitcoin in the long run.

We are about to enter the most seasonally bullish period of the year (the last weeks of December and the first week of January). **I do not expect a major financial crisis to occur in the next 6 to 8 weeks. Overall, all of this indicates that liquidity will begin to return to the system, supporting assets such as the stock market, Bitcoin and Ethereum. As for whether it can reach a new all-time high, it may be possible for the stock market, but Bitcoin still needs to be watched.

Macro debt cycle and outlook for gold and the US dollar

Moderator: This brings me to my next question: Are market cycles independent of macroeconomic conditions? For example, most traders are currently predicting a “soft landing” for the economy. How does your view of the economy influence your cyclical analysis of assets such as Bitcoin or gold?

Richard: The macroeconomic context has a significant impact on asset performance, especially during the current debt cycle and interest rate changes. Looking back at history, from 1955 to 1981, long-term interest rates experienced a continuous rise of about 26 years, peaking at around 16%. According to the classic Kontradiev long-cycle theory, interest rates should have completed a cyclical bottom around 2007 and entered a new upward cycle. However, the subprime mortgage crisis of 2008 led governments to implement massive stimulus policies, including zero interest rates and quantitative easing (QE), which kept interest rates low for more than a decade. It is only in recent years that interest rates have begun to recover significantly, and we are currently in a phase of high debt levels and rising interest rates.

This combination poses significant challenges: heavy debt burdens and increased interest costs force fiscal policy to focus more on controlling volatility and interest rates. Asset performance has also been profoundly impacted, such as Bitcoin, which has become a completely different asset between 2012 and 2025, and its deep embedding in the liquidity system makes it more susceptible to debt cycles and policy cycles. The future asset trend needs to be comprehensively studied and judged in combination with the macro background.

I would like to mention stablecoins and money market funds again.

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The market capitalization of stablecoins has continued to grow since 2018, from almost zero to over $300 billion. Especially after Trump’s election, the market value of stablecoins has shown a straight upward trend. Under the GENIUS Act, stablecoin issuers must purchase short-term U.S. Treasury bonds as reserves after absorbing the US dollar. This effectively provides a new avenue for foreigners to buy dollars and ultimately to finance U.S. Treasury bonds.

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Similarly, the size of money market funds has grown sharply, reaching $7.5 trillion. These funds usually buy short-term U.S. Treasury bonds after acquiring U.S. dollars, which is consistent with the pattern of stablecoins also investing in short-term Treasury bonds after obtaining funds. The two ultimately point to the same goal, which is to assist the U.S. Treasury Department in continuing to refinance huge amounts of short-term Treasury bonds on a rolling basis.

At present, the U.S. Treasury Department is more inclined to issue short-term Treasury bonds, mainly because the interest rate of long-term Treasury bonds is too high, and the large-scale issuance of long-term debt will lead to an excessive interest burden in the coming decades. In response to current political and economic realities, the Treasury is prioritizing short-term funding needs, such as “holding on until the midterm elections,” while temporarily setting aside long-term risks. **

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Richard: The MOVE index (the “VIX of the bond market”), which measures the implied volatility of the U.S. Treasury market, continues to be low, and since April, it has fallen sharply and is now at an all-time low. This shows that there is no crisis in the treasury bond market at present. As long as the volatility of these assets is low, their value as collateral is high, and the repo system will function properly. I don’t see any signs of a major crisis in the Treasury market at the moment, which could continue until at least January. As long as the bond market is flowing smoothly and the Fed relaxes a little, it is good for both the stock market and cryptocurrencies. **

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Now let’s take a look at gold (GLD). Our cyclical analysis shows that gold should peak, and it did peak around October 20. While there was no crash, the cyclical’s forces did slow its upward momentum. I believe that the confiscation of Russian assets by the United States during the Russia-Ukraine war is a serious warning to the global dollar system. This has prompted central banks in some countries, especially the BRICS countries, to buy gold to move away from their complete dependence on the dollar and the US government. This is part of what is driving gold upward.

Moderator: How big of a pullback do you think gold will usher in? Historically, after the peak of the bull market in 2011 and 1980, gold has experienced significant declines of 40% to 60%.

Richard: Cyclical analysis is characterized by revealing “time” and “direction”, but it cannot directly predict the rise and fall. While multiple cycle models point to gold peaking here, that doesn’t mean it will “crash”. I personally believe that gold will not experience a collapse due to concerns about the U.S. federal deficit and the real demand for central bank gold purchases under geopolitical factors. It simply needs to “catch a breather,” and the cycle indicates that this moment of respite may have arrived.

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Closely related to gold is the fate of the US dollar. In my opinion, the dollar is forming a bottom. It may still have some downside and may even make a new low, but this is likely to be the final low. This is our proprietary momentum indicator called the “Cyclical RSI”. You can see that the momentum of the dollar is rising, but the price is not rising as fast. I expect the USD price to move further lower, but the momentum will remain steady. I think we will see a significant rebound in the US dollar by 2026. Of course, this puts pressure on dollar-denominated assets such as gold. Overall, I expect gold to be sideways or downward in the next 6 to 12 months.

“Bubble for Everything” and Crisis Warning for 2026

Moderator: Do you think you can use the cycle of one asset (like gold) to predict the cycle of another related asset (like the US dollar)?

Richard: Yes, you can often see similar period lengths in highly correlated assets. That’s why I look at various markets and try to grasp the big picture of what I call “fiscal dominance”. The current market’s top priority is to manage the national debt and federal deficit.

I even have a point that may sound crazy: the massive investment in AI data centers we are seeing now is ultimately aimed at driving down Treasury yields. When these tech giants finance long-term debt for data centers, these newly issued, reasonable-yielding corporate bonds enter the debt system, providing a benchmark against which Treasuries can be compared, helping to drive down Treasury yields. At the same time, these companies also need to participate more in the Treasury market in order to hedge loan risks. It’s all about driving interest rates down across the yield curve. I suspect that this huge investment in AI is motivated more by fiscal-led needs than real productivity needs. **

Moderator: At this point, I can’t help but ask, are we in an “Everything Bubble” right now? Since 2008, especially after the pandemic in 2020, we have seen almost all assets such as stocks, Bitcoin, gold, real estate, etc. rise together, driven by the expansion of the money supply. Where do you think we are in this cycle?

Richard: You’re right. The root cause of this “bubble of everything” is the astonishing expansion of financial assets due to historically low interest rates. From 2008 to recently, this bull market has almost exactly coincided with the trajectory of the 10-year Treasury rate falling from 16%-17% to zero.

Although interest rates have now rebounded, the Fed has offset the negative impact of interest rate hikes with massive stimulus (QE). However, without another sudden crisis, this massive stimulus can no longer be rationalized. We are in a very delicate situation: the country is close to bankruptcy and the currency is in crisis. **

I think this situation can continue for a while, but not for long. My gut tells me that the turning point is around mid-2026. **

Moderator: You mentioned that JP Morgan predicts a record $1.8 trillion in bond issuance in 2026, primarily driven by AI investments. If this really lowers yields, isn’t it good for risk assets? Does this contradict what you call the “top stage”?

Richard: This is a big reason why I think the top phase may be “extended” or “shifted to the right” (cyclical analysis term, which refers to the top appearing later than expected). There is still “ammunition” in the market. For example, the Fed’s interest rate is now 3.75%, and everyone is used to zero interest rates, so they feel that “there is still room for interest rate cuts.” I personally don’t think there is actually room for rate cuts, but I think they will eventually cut interest rates. And this will eventually lead to a surge in inflation and a bigger crisis.

Host: What would this bigger crisis look like if it did break out?

Richard: It looks like it will be: soaring interest rates, a heavier burden on the budget from the federal deficit, rising populism, and voter anger. Frankly, the day I am truly optimistic about the future will be when we stop pinning our hopes on the federal government to save us.

Moderator: So, are there any specific indicators or “signposts” that allow us to observe whether we are approaching the crisis scenario you described?

Richard: Of course there is. I focus on two indicators:

• MOVE Index: This is the volatility index of the bond market. You need to be wary of whether it starts to rise. At the moment it has been plummeting since April, so the situation is fine. High-yield bond option-adjusted spreads: This is a measure of high-risk debt spreads, also at historically low levels.

As long as the volatility of these debts remains low and manageable, they can be used as collateral for refinancing within the system. The problem is that when these indicators start to rise sharply, the crisis is near. You know, a large number of loans (with an average maturity of about 5.5 years) during the zero interest rate period in 2020 are now under pressure to refinance. So far, they have managed to keep the situation under control. But if things start to change significantly, we will see a more significant pullback in financial assets.

Moderator: Finally, are there any mainstream financial assets that are completely non-cyclical, so that your analysis method is not applicable?

Richard: I personally have had the least success in the gas market. Natural gas is a commodity that is extremely difficult to store, making it highly volatile and not following typical supply and demand cycles like other commodities like oil. So, there are some markets where it is difficult to apply cyclical analysis. In addition, cycle analysis is more effective in a long-term framework than in the short term (such as day trading). **