Original Title: The Liquidity Pyramid: Why This Bull Market Still Has Legs

Translation by: Odaily Planet Daily Asher（@Asher_ 0210）

Editor's Note: The summer bull market of 2025 is significantly different from previous ones. The source of funds is no longer primarily reliant on the Federal Reserve or Treasury policy injections, but is driven by equity earnings from large tech giants and record capital expenditures. These funds are transmitted layer by layer into the crypto market through new mechanisms of corporate treasuries (TCo) and ETFs, forming a self-reinforcing flywheel effect. This article will delve into this mechanism, analyze the changes in the buyer structure of ETH and BTC, and provide market forecasts in conjunction with macroeconomic conditions and policy factors.

Despite the Federal Reserve tightening policies and fiscal stimulus weakening, risk assets continue to soar, driven by two overlapping chains. First, AI-driven capital gains and record capital expenditures from large tech giants are continuously injecting risk capital into the crypto market through wages, supplier payments, and shareholder dividends. Second, corporate treasury TCo (Treasury Company) has established a new transmission mechanism that directly converts the reflexive frenzy of the stock market into on-chain buying, thus forming a self-reinforcing market flywheel.

This flywheel effect can not only withstand seasonal weakness and macro noise but also continuously drive the market upward until top-tier corporate capital expenditures decline or ETF demand stagnates. In other words, this bull market is driven by liquidity created by large publicly traded companies, rather than traditional monetary or fiscal policies.

The Shift in Sources of Liquidity and New Crypto Buyers

Traditionally, market liquidity relied on the Federal Reserve or Treasury, but the current liquidity has shifted. The equity earnings and over $100 billion in capital expenditures from tech giants like Nvidia and Microsoft are radiating across all levels of the economy, affecting not only suppliers and employees but also encouraging retail investors to increase their positions in risk assets, especially in the crypto market.

At the same time, a new structural buyer has emerged in the crypto market—corporate treasury TCo. In past cycles, the lack of large buyers was one reason for price volatility, but now, corporate treasuries of BTC and ETH not only act as a bridge for funds but also defend key price ranges and drive price breakthroughs. Corporate treasuries can be divided into two generations: early TCo are price insensitive and only serve as a bottom support; the new ETH-related TCo have price discovery functions and can actively buy when equity values accelerate, thus forming a complete self-circulation: corporate stock issuance brings in funds, TCo buys reserve assets pushing token prices up, while the value of the parent company's stock held by TCo rises, reducing financing costs, and then reinvesting in the crypto market, creating a cycle.

It is important to note that this mechanism is not without risks. If ETFs or retail investors fail to fill key price ranges, there may be gaps in between, leading to a rapid decline in token prices, and short-term volatility remains a concern.

Structural Changes in Ethereum

The ETH market is significantly different from previous cycles. In the past, buyers were mainly retail investors and miners, but now, ETFs and TCo have become the main forces in the market, jointly combating liquidity gaps, with price range defense and phased buying forming a new market narrative.

From a technical analysis perspective, this phenomenon can be understood using the "cup theory": prices first form a low point (cup bottom) in a specific range, then slowly rise (cup rim), presenting a U shape overall. When prices break through the cup rim, it usually indicates that the market has the potential to continue rising. In the Ethereum market, corporate treasuries will focus on defending the price range of $3000 to $3500, while ETFs buy in phases in the middle gaps, akin to filling a cup with water, allowing prices to smoothly break through the cup rim and continue the upward trend.

If tech companies maintain strong demand for ETH allocation, this round of market activity still has room for continuation; if demand is insufficient, the market may experience temporary gaps and corrections. Overall, the change in the market buyer structure means that Ethereum no longer relies solely on retail investors or miners but is jointly supported by institutions and corporate treasuries, making the market more stable and providing conditions for sustained price increases.

Dual Drivers of Macroeconomic Environment and Tech Giants' Capital Expenditures

In the current market environment, macro factors and AI development are intertwining to influence the economy and market trends. U.S. commodity sales prices have risen for several months, with implied inflation levels around 4%, indicating that price pressures remain. Nevertheless, the Federal Reserve may still tolerate a certain degree of inflation to support economic growth, given the overall stability in the labor market. However, the long-term high youth unemployment rate is often seen as a warning signal in the early stages of an economic cycle—young people are usually the first to feel economic fluctuations, and if employment conditions remain weak, the overall labor market may come under pressure, affecting risk assets.

Capital expenditures from tech giants are becoming an important source of market liquidity. Mega-scale tech companies are making large-scale investments in AI infrastructure, providing funds not only for suppliers, employees, and shareholder dividends but also potentially significantly enhancing the economy's total factor productivity in the medium to long term. If the productivity gains from AI meet expectations, by 2055, the U.S. public debt-to-GDP ratio is expected to drop from a baseline of 156% to about 113%, with per capita GDP also projected to grow by about 17%. However, it is important to note that historical experience shows that the productivity effects brought by technological innovation often have a lag, and the market tends to discount these future gains in advance, which is part of the logic behind the current high valuations in the stock and crypto asset markets.

At the same time, uncertainty in trade policies and tariff pressures are changing corporate investment behaviors. In the face of a complex international trade environment and policy ambiguity, many companies prefer to invest funds in financialized assets rather than long-term capital expenditures, such as factories, equipment, or expansion projects. This preference for short-term capital flows into asset markets has, to some extent, supported the rise of risk assets, forming a structural background for a bull market driven by private sector liquidity.

Investment Strategy

In terms of investment strategy, focus should be placed on high-quality tech giants with AI compounding stocks, while selectively positioning in infrastructure sectors such as computing power, electricity, and networks. In the crypto market, Bitcoin can serve as a benchmark asset for risk exposure, while Ethereum plays the role of the "self-reinforcing flywheel," requiring close attention to key price defense ranges and potential gaps. In terms of risk management, attention should be paid to the inflow and outflow dynamics of ETFs, the funding arrangements of corporate treasuries, and the capital expenditure plans of large tech companies. Moderate accumulation can be made in key defense ranges, but if the market breaks through without subsequent support, caution should be exercised in reducing positions.

Overall, this bull market is significantly different from the 2021 cycle, with the current upward momentum primarily stemming from private sector liquidity driven by large tech companies. These companies release funds through equity earnings and capital expenditures, directing funds to suppliers, employees, shareholders, and retail investors, which are then transmitted to the crypto market through corporate treasuries and ETF structures, forming a self-reinforcing market flywheel. Key price ranges are supported by the defense and phased buying of corporate treasuries, while ETFs and retail investors fill in the middle gaps, allowing market momentum to continue. As long as tech giants remain actively engaged in capital investment, this chain of private sector liquidity remains open, and the bull market still has room for further extension.

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