The global liquidity cycle and the 4-year crypto cycle are already talked about, but few have mentioned another cycle that is more informative than these two. This cycle truly determines global wealth distribution, asset pricing, and economic prosperity and decline, Because the time span is usually 7-10 years, it is often overlooked by investors. Traditional macroeconomics is generally referred to as the business or credit cycle. Slightly more complex than a four-year cycle, the typical path of a credit cycle is: First easing → credit expansion → asset growth → overheating → inflation foam period → tightening → recession clearing → easing again. We seem to have just completed half of the cycle, so let's adjust the timeline to the beginning of the cycle first. The first stage of the cycle is macro easing and credit expansion. After experiencing the previous crisis, the central bank significantly reduced interest rates, resulting in extremely low funding costs. After repairing the balance sheets of businesses and residents, they began to tentatively borrow. At this point, the borrower's operations are very cautious, and the cash flow generated must be sufficient to cover both principal and interest. The credit ice has broken, and the economy has begun to recover moderately. With the improvement of the economy, corporate profits have increased and residents' income has risen. The steady rise in asset prices (stocks, real estate, cryptocurrencies) has brought strong wealth effects to the market. At the same time, the appreciation of collateral has made banks more willing to lend, and businesses and residents have become bolder, gradually using speculative financing, where people's cash flow can only cover interest, and the principal needs to be continuously renewed or repaid through asset appreciation. So the flywheel began to rotate, and both the supply and demand sides rose simultaneously. Society and consumption began to show a prosperous scene The foam is also coming. The optimistic sentiment in the market will quickly evolve into fanaticism, and people will begin to linearly extrapolate the current prosperity into eternity. Funds are shifting from real to virtual, with a large influx into the speculative field. Ponzi financing is on the rise, and borrowers' cash flow cannot even cover interest at this time, completely relying on the continued surge in asset prices and borrowing new to repay old to maintain survival. At the same time, the overheated total demand exceeds the physical limit of production capacity, causing commodity and labor prices to soar and inflation to rapidly rise. So, tightening and turning points will quickly come, and hyperinflation will force the central bank to take action, opening a fierce interest rate hike cycle and draining the liquidity at the bottom of the market. The high interest rates have led to a sharp increase in the cost of funds, and Ponzi financing, which originally relied on a low interest environment for rolling, is the first to face a break in the funding chain. Asset prices have stopped rising or even begun to decline, and the value of collateral has rapidly shrunk. Finally, we have arrived at our current point in time, the deleveraging phase, which is the most painful but necessary stage in the credit cycle of recession and liquidation. The depreciation of collateral triggered a panic among banks, leading to large-scale loan withdrawals, bankruptcies of highly leveraged enterprises, a wave of layoffs, and a sharp decline in residents' income. As a result, they could only reduce consumption, sell assets to repay debts, and asset prices further plummeted. The spiral decline of debt deflation has driven the clearance speed of the market, causing the death of zombie companies that ignore risks and the rapid clearance of bad debts within the system. When valuations become extremely cheap again and debt leverage drops to a healthy level, inflation will be completely knocked down, and the central bank will have the conditions to cut interest rates again, thus starting the next cycle. This cycle started with the COVID-19 pandemic in 2020, and calculated over 7-10 years, we will see the true bottom of the market as early as next year. Of course, it is not ruled out that cryptocurrency will continue to emerge from its independent market trend. The logic is also very simple. As a new industry that erupts in the cycle, especially with high volatility and high risk, crypto assets do not have an excessive credit foam to a certain extent.