The key to the bear-bull transition: the second S-shaped rise curve

Original Title: The Second S-Curve

Original author: arndxt

Source text:

Reprint: Mars Finance

Liquidity expansion remains the dominant macro narrative.

Recession signals lag, and structural inflation is sticky.

The policy interest rate is higher than the neutral level but lower than the tightening threshold.

The market is pricing for a soft landing, but the real adjustment is at the institutional level: from cheap liquidity to restrained productivity.

The second curve is not periodic.

It normalizes the structural aspects of finance through yield, labor, and credibility under actual constraints.

Cycle Conversion

Token2049 in Singapore marks a turning point from speculative expansion to structural integration.

The market is re-pricing risk, shifting from narrative-driven liquidity to income-supported yield data.

Key Transformation:

· The perpetual decentralized exchange maintains a dominant position, and Hyperliquid ensures liquidity at network scale.

· Prediction markets are emerging as functional derivatives of information flow.

· AI-related protocols with real Web2 application scenarios are quietly expanding their revenue.

· Re-staking and DAT have peaked; liquidity diversification is evident.

Macroeconomic systems: currency devaluation, population structure, liquidity

Asset inflation reflects currency depreciation, rather than organic growth.

When liquidity expands, duration assets perform better than the market.

When liquidity contracts, leverage and valuations will be compressed.

Three structural driving factors:

· Currency depreciation: Repaying sovereign debt requires continuous balance sheet expansion.

· Population structure: Population aging reduces productivity and strengthens the reliance on liquidity.

· Liquidity Pipeline: The total global liquidity, which is the sum of reserves held by central banks and banking systems, has tracked 90% of risk asset performance since 2009.

Recession Risk: Lagging Data, Leading Indicators

The mainstream recession indicators are lagging.

CPI, unemployment rate, and the Sam Rule will only be confirmed after the economic downturn begins.

The United States is in the late stage of the economic cycle, not in a recession.

The possibility of a soft landing is still higher than the risk of a hard landing, but the timing of policy is a limiting factor.

Leading Indicators:

· An inverted yield curve remains the clearest leading indicator.

· The credit spread has been controlled, indicating that there is no imminent systemic pressure.

· The labor market is gradually cooling down; employment remains tight within the cycle.

Inflation Dynamics: Last Mile Issues

The commodity anti-inflation has been completed; service inflation and wage stickiness will now anchor the overall CPI around 3%.

This “last mile” is the most complex phase of anti-inflation since the 1980s.

· Commodity deflation has now offset some of the CPI impact.

· Wage growth of nearly 4% keeps service inflation elevated.

· Housing inflation is lagging in measurement; real market rents have cooled.

Policy Meaning:

The Federal Reserve faces a trade-off between credibility and growth.

· There is a risk of accelerating again if interest rates are cut too early; if maintained for too long, there is a risk of excessive tightening.

The balanced result is that the new inflation floor is close to 3%, rather than 2%.

macroscopic structure

Three long-term inflation anchors still exist:

· De-globalization: Diversification of the supply chain has increased transformation costs.

· Energy Transition: Capital-intensive low-carbon activities have increased short-term investment costs.

· Population structure: Structural labor shortages lead to persistent wage rigidity.

These limit the Federal Reserve's ability to normalize without higher nominal growth or higher equilibrium inflation.