Buffett Indicator skyrocketing, Bitcoin is standing at a macro crossroads

Bitcoin is entering a macro phase where the rhythm matters more than the narrative.

The stock market is near all-time highs, real yields remain high, and the credit market is expanding into increasingly opaque corners of the financial system. These conditions do not guarantee an imminent crisis, but they set the stage for high volatility in risk assets.

For Bitcoin, the key question is: will pressure manifest within the high-valuation financial system, and how quickly can policymakers act to contain it?

Macro strategist Michael Pento describes the current landscape as a “triple bubble”: stock valuations approaching historic extremes, real estate suppressed by nearly 6% mortgage rates, and private credit management soaring toward $2 trillion. This framing is eye-catching but useful because it emphasizes the sequence of events.

If credit problems emerge first, liquidity could evaporate instantly, likely leading to Bitcoin and other assets being sold off together. Conversely, if policymakers intervene early, Bitcoin could act as a high-beta liquidity trading asset, rebounding faster than traditional risk assets.

Financial systems rarely collapse solely due to overvaluation. Crashes typically occur when credit and bond chains are forced into liquidation. Bitcoin’s 24/7 liquidity means its volatility during panic and bailout scenarios is almost always more intense than any other asset.

Recent data shows pressure signals are building but have not yet triggered a collapse.

On February 23, the US high-yield bond option-adjusted spread was 2.95%, still relatively tight compared to crisis levels.

On February 18, the Federal Reserve’s balance sheet was $6.613 trillion, up about $28.8 billion in recent weeks—moderate expansion, not indicative of emergency liquidity.

On February 20, the 10-year TIPS real yield was around 1.80%, enough to pressure zero-yield assets.

Stablecoin market cap is approximately $308.8 billion, with a 30-day change of -0.18%, essentially flat.

Since early 2026, Bitcoin spot ETF holdings have outflows totaling about $2.6 billion, with nearly $4.3 billion in outflows over the past five weeks.

Bitcoin’s decline first—reasons to follow

Deleveraging driven by deflationary liquidation often begins in the credit markets, not stock indices.

A sharp widening of high-yield spreads, pressure on financing markets, and soaring volatility make cash the only desired position.

Bitcoin’s behavior in such phases is predictable: perpetual funding rates turn negative, leverage liquidations cause holdings to plummet, liquidity exits lead to shrinking stablecoin supplies, and ETF outflows accelerate.

March 2020 is a classic example. During the global liquidity shock, Bitcoin plunged nearly 40% on March 12, along with stocks, credit, and commodities, as market participants franticly sought dollar liquidity.

A credit-driven liquidation can cause Bitcoin to fluctuate -20% to -40% within days.

In early February 2026, VanEck noted Bitcoin futures open interest peaked above $90 billion in October 2025, then reduced leverage by over 45%. If credit stress intensifies, further forced selling remains possible.

Moody’s projects private credit assets will exceed $2 trillion by 2026, approaching $4 trillion by 2030. Reuters reports US banks have invested $25 billion in this sector.

This growth concentrates credit risk in less transparent, longer lock-up, weaker contractual structures.

Once a credit event triggers forced sales in private credit portfolios, a chain reaction can occur through margin calls and collateral pressures on public markets. Bitcoin, as the most liquid and 24/7 traded risk asset, disproportionately bears the brunt of such sell-offs.

Bitcoin futures open interest peaked above $90 billion in October 2025, then declined by about 45% to early February 2026, while Bitcoin price fell from around $68,000 to near $60,000, then rebounded to about $67,000.

Bitcoin will front-run policy bailouts

The opposite scenario begins with clear policy support.

The Fed expands its balance sheet, emergency tools are deployed, and real yields decline. Bitcoin’s response in this environment is also predictable: funding rates and basis normalize, liquidity returns boost stablecoin supply, ETF outflows stabilize or turn positive, and holdings rebuild.

In a clear bailout scenario, Bitcoin often acts as a high-beta liquidity asset, rebounding faster than traditional risk assets because it has no credit risk or earnings surprises. It’s a liquidity claim on a fixed-supply currency asset, benefiting as real yields fall.

The March 2023 banking turmoil is a textbook example. As market expectations shifted toward easing, Bitcoin surged 26% in a week, about 40% in ten days, front-running the Fed’s eventual liquidity support.

In February 2026, Bitcoin soared from around $60,000 to over $70,000 in a single day—the largest daily gain since March 2023—highlighting that macro risk sentiment remains the dominant driver during stress windows.

In March 2020, Bitcoin crashed along with all assets, but the Fed cut rates to zero, launched unlimited QE, and set up emergency lending facilities within weeks.

Bitcoin recovered from the March 12 lows and increased fivefold over the following year, as real yields remained deeply negative and fiscal spending expanded sharply.

The lesson: Bitcoin’s beta to liquidity cycles is arguably higher than any other asset, and timing is more important than the narrative.

A flowchart illustrates three potential paths for Bitcoin under triple bubble pressure: credit collapse causing 20-40% sell-offs, policy bailouts triggering high-beta rebounds, or stagflation leading to price swings between safe-haven demand and currency devaluation narratives.

When both paths are unfavorable

The most chaotic scenario is: persistent inflation, bond markets demanding higher term premiums, and high real yields, limiting policymakers’ ability to quickly bail out without reigniting inflation fears.

In this environment, Bitcoin will likely oscillate sideways. Safe-haven and devaluation narratives pull in opposite directions. When real yields stay high or policy support falls short, rebounds fade.

The 10-year TIPS yield at 1.80% is well above zero or negative real yields seen during Bitcoin’s strongest rallies.

The 30-year fixed mortgage rate at Fannie Mae averaged 6.01% on February 19.

The Buffett indicator (total market cap / GDP) is about 206%, according to Advisor Perspectives, the highest on record. This suggests that unless earnings grow or discount rates fall, stock valuations have little room to expand further.

If credit stress emerges but policymakers do not pivot quickly, Bitcoin could enter a prolonged sideways phase with no forced liquidations or bailouts.

Tracking market shifts with a simple framework

A weekly update of four indicators:

• Changes in the Fed’s total assets over 4–8 weeks;
• 30-day change in stablecoin market cap;
• 2–4 week change in high-yield bond spreads;
• 2–4 week change in 10-year real yields.

When these indicators weaken significantly, Bitcoin tends to be volatile like a high-beta asset during liquidity events.

When they improve and inflation expectations rise, Bitcoin often outperforms the broader market.

Current readings show a neutral-to-bearish liquidity environment:

• Fed balance sheet slightly expanding but not aggressively;
• Stablecoin supply flat or slightly declining;
• Credit spreads still tight;
• Real yields high and stubborn;
• Bitcoin spot ETF outflows continue;
• Derivatives positions nearly halved from peak levels.

The market is waiting for a catalyst: either credit stress triggers a liquidation cascade or policy support reignites liquidity trading.

Signals emerge from the credit chain

An actionable monitoring framework focuses on credit and crypto’s underlying chains:

• Rising high-yield spreads from lows → declining credit market confidence;
• Rising US bond volatility and term premiums → bond market pricing in policy constraints;
• Fed balance sheet steady or shrinking, spreads widening → no backstop in place.

Crypto signals:

• Large drops in holdings → forced selling;
• Stablecoin market cap shrinking → liquidity leaving;
• ETF outflows persist → institutional risk aversion.

Bailout confirmation signals:

• Significant weekly increase in Fed assets → active liquidity provision;
• Falling 10-year TIPS yields → declining real yields;
• Growing stablecoin supply + normal derivatives funding rates → crypto liquidity returning.

The shift from liquidation to bailout can happen quickly. March 2020 is a prime example: Bitcoin first plunged, then rebounded within weeks as policy support was implemented.

The biggest value of the triple bubble theory is not predicting crises but providing a sequence framework.

Credit breakdown triggers liquidations, causing Bitcoin to be sold cheaply;

Policy bailouts trigger liquidity surges, allowing Bitcoin to front-run traditional assets.

The current macro setup—overvalued markets, high real yields, tight credit spreads, stablecoin supply steady, ETF outflows—indicates the market has priced in pressure but has not yet experienced a credit chain collapse forcing selling.

Bitcoin’s next big move depends not on whether bubbles exist but on whether credit breaks first or the Fed intervenes first.