Following a sharp pullback in the Bitcoin (BTC) price, economist James E. Thorne has offered a comprehensive assessment of the macroeconomic dynamics influencing the markets.
Thorne stated that the reopening of the US government, coupled with the Treasury's management of the Treasury General Account (TGA), represents a “near-term liquidity injection” into the financial system. He indicated that this process marks the official end of quantitative tightening (QT), which had been slowing.
Monetary Policy Outlook
According to Thorne, the Federal Reserve's interest rate cuts are expected to continue. The economist anticipates the federal funds rate will be lowered to approximately 2.75%. He further noted that the composition of the Federal Open Market Committee (FOMC) will change in 2026, and that Chairman Jerome Powell is expected to leave office, which he described as “the end of the era of progressive left-wing Keynesian control.”
Housing Market Impact
Thorne emphasized that current monetary policies have led to a noticeable stagnation in the housing market. He explained that excessively tight financial conditions, delayed policy responses, and a reliance on backward-looking indicators have disrupted credit channels, thereby weakening the housing market, which is a key sector of the economy.
Bitcoin Adoption and Fundamentals
Despite the challenging economic outlook, Thorne observed that Bitcoin adoption is increasing rapidly. He believes that new legislation providing regulatory clarity will further bolster institutional adoption. Recalling that the global fiat money supply continues to expand, the economist stated, “Nothing has changed; Bitcoin's digital rarity remains unparalleled.”
Investor Behavior and Market Cycles
Thorne described the selling trend observed among some investors, even as Bitcoin's long-term fundamentals strengthen, as a typical example of “irrationality in the markets.” He pointed out that liquidity shifts during periods of high volatility create opportunities that are often only recognized in retrospect. Thorne concluded his assessment by stating, “A bull run ends when liquidity runs out, not when it begins. This has always been the case.”