Economic fissures deepen, Bitcoin may become the next liquidity "pressure relief valve".

Original Title: The Two-Tier K-Shaped Economy

Original author: arndxt

Original source:

Reprint: Mars Finance

The American economy has split into two worlds: on one side, the financial markets are thriving, while on the other, the real economy is sinking into a slow recession.

The manufacturing PMI index has contracted for more than 18 consecutive months, the longest record since World War II, yet the stock market continues to rise, as profits become increasingly concentrated among tech giants and financial firms. (Note: The full name of “manufacturing PMI index” is “Purchasing Managers' Index for Manufacturing,” which is a “barometer” for measuring the health of the manufacturing sector.)

This is actually “balance sheet inflation.”

Liquidity continues to drive up the prices of similar assets, while wage growth, credit creation, and small business vitality remain stagnant.

The result has led to economic fragmentation, where different sectors move in completely opposite directions during recovery or economic cycles:

On one side: capital markets, asset holders, the technology industry, and public companies are rapidly rising (profits, stock prices, wealth).

On one side: the working class, small businesses, blue-collar industries → decline or stagnation.

Growth and challenges coexist.

Policy failure

Monetary policy can no longer truly benefit the real economy.

The Federal Reserve's interest rate cuts have driven up stock and bond prices, but have not brought about new jobs or wage growth. Quantitative easing has made it easier for large enterprises to borrow money, but has not helped the development of small businesses.

Fiscal policy is also nearing its end.

Today, nearly a quarter of government revenue is used solely to pay interest on national debt.

Policymakers are caught in a dilemma:

Tightening policies to combat inflation leads to a stagnant market; relaxing policies to promote growth causes prices to rise again. This system has already entered a self-reinforcing cycle: once there is an attempt to deleverage or reduce the balance sheet, it will impact the asset values that it relies on for stability.

Market Structure: Efficient Harvesting

Passive fund flows and high-frequency data arbitrage have turned the public market into a closed-loop liquidity machine.

Positioning and volatility supply are more important than fundamentals. Retail investors have effectively become the counterpart of institutions. This explains why defensive sectors have been abandoned, while technology stocks' valuations skyrocket; the market structure rewards chasing gains and does not reward value.

We have created a market that is highly price-efficient but has very low capital efficiency.

The open market has become a self-circulating liquidity machine.

Capital flows automatically → Through index funds, ETFs, and algorithmic trading → Creating continuous buying pressure, regardless of the fundamentals.

Price movements are driven by capital flow, not by value.

High-frequency trading and systematic funds dominate daily transactions, while retail investors are actually on the opposite side of the trades. Stock price fluctuations depend on position allocation and volatility mechanisms.

Therefore, technology stocks continue to expand, while defensive sectors lag behind.

Social Backlash: The Political Cost of Liquidity

Wealth creation in this cycle is concentrated at the top.

The top 10% of the population holds over 90% of financial assets; as the stock market rises, the wealth gap widens. Policies that drive up asset prices simultaneously erode the purchasing power of the majority.

With no substantial wage growth and the inability to afford housing, voters will eventually seek change, either through wealth redistribution or political turmoil. Both will exacerbate fiscal pressure and drive up inflation.

For policymakers, the strategy is clear: maintain excessive liquidity, boost the market, and claim economic recovery. Replace substantial reform with superficial prosperity. The economy remains fragile, but at least the data can hold up until the next election.

Cryptocurrency as a pressure relief valve

Cryptocurrency is one of the few fields that does not rely on banks or governments and can hold and transfer value.

The traditional market has become a closed system, where large capital has already captured most of the profits through private placements before going public. For the younger generation, Bitcoin is no longer just speculation; it is an opportunity to participate. When the entire system seems to be manipulated, at least there is still an opportunity here.

Although many retail investors have been hurt by overvalued tokens and VC sell-offs, the core demand remains strong: people long for an open, fair financial system that they can control.

Outlook

The U.S. economy cycles in a “reflex reaction”: tightening → recession → policy panic → easing → inflation → repeat.

The next round of easing may come in 2026, due to slowing growth and expanding deficits. The stock market may have a brief celebration, but the real economy will not truly improve unless capital shifts from supporting assets to productive investments.

At present, we are witnessing the late stage of financialized economy:

· Liquidity acts as GDP

· The market has become a tool of policy

· Bitcoin becomes a social pressure valve

As long as the system continues to cycle debt into asset bubbles, we will not achieve a true recovery, only a slow stagnation masked by nominal increases.