Source: CryptoNewsNet Original Title: Global Markets Liquidity Returns in a Broken System | US Crypto News Original Link: https://cryptonews.net/news/analytics/32103355/

Welcome to the US Crypto News Morning Briefing

Grab a coffee as global markets enter a period of unprecedented friction with the era of synchronized economic cycles coming to an end. While the US quietly restores liquidity, China remains locked in a state of deflation, and Japan’s rising bond yields threaten to destabilize global capital flows. This has created a fractured, multi-speed adjustment that will test investors and policymakers alike.

Global Financial Markets Enter Structural Strain

Global financial markets are entering a period of profound structural strain, as long-standing assumptions about synchronized economic cycles collapse.

Against this backdrop, investors now face a fractured global system, with competing forces shaping market behavior:

• US liquidity injections
• Chinese political constraints
• Japanese fiscal stress

China’s $18.9 Trillion Debt Trap: Why Beijing Can’t Print

In China, structural constraints limit the government’s ability to pursue large-scale monetary interventions.

The scale of the problem extends from local government debt reaching ¥134 trillion ($18.9 trillion). This is dispersed across 4,000 financing vehicles and has been exposed by a property collapse that has destroyed key revenue streams.

Unlike Japan, which leveraged QE to stabilize its economy, China cannot monetize. Capital flight is severely punished. Debt functions as a political tool rather than an economic liability.

“Monetization would sever the control mechanism holding the system together,” researcher Shanaka Anslem explains.

The result: persistent deflation, a slowdown in growth to around 4%, and a tightly managed renminbi (RMB, China’s official currency).

Analysts warn this will extend global disinflationary forces years beyond consensus, a phenomenon Anslem calls “the Long Grind.”

Fed’s Lagging Balance Sheet: The Hidden Risks of Post-QE Tightening

Meanwhile, the US faces its own structural challenges. The Federal Reserve officially concluded its three-year, five-month quantitative tightening (QT) program on December 1, reducing its balance sheet by $2.43 trillion to $6.53 trillion.

Treasury securities dropped to $4.19 trillion, and mortgage-backed securities fell to $2.05 trillion, unwinding over half of the pandemic-era QE expansion.

Analyst Endgame Macro notes that the real danger lies not in the Fed’s balance sheet itself but in the lag of its effects. Tightening over the past two years has left households stretched, corporate bankruptcies hitting 15-year highs, and small businesses without a safety net.

Even with rate cuts and eventual QE, policy cannot instantly reverse stress already moving through the economy.

The Fed is now pivoting to Reserve Management Purchases (RMP), with officials expected to buy $20–$40 billion in Treasury bills per month starting in January 2026. This quietly injects $480 billion in liquidity annually while keeping the mechanics of QE off the books.

Bank reserves, already at $3 trillion, are set to expand, shifting from abundant to adequate and signaling changing conditions for risk assets, inflation hawks, and credit markets alike.

Japan’s Debt Crunch: The 30-Year Ultra-Low-Rate Era Comes to an End

Across the Pacific, Japan is confronting a fiscal reckoning that may ripple through global markets.

Japanese bond yields have surged, with the 20-year yield hitting 2.947%, the highest since 1998. The 10-year at 1.95% levels are flagged as critical by institutional stress models. The Bank of Japan now holds ¥28.6 trillion in unrealized losses, equivalent to 225% of its capital base, rendering it technically insolvent.

Rising yields threaten the $1.13 trillion in US Treasuries held by Japanese investors, as well as the $1.2 trillion yen carry trade, which could unwind and trigger $500 billion in global capital outflows over 18 months.

“For 30 years, Japanese yields anchored global rates artificially low. Today, it snapped. The world is shifting into an entirely different interest-rate regime.”

Not a Soft Landing: The World Enters a Three-Speed Financial Reset

The convergence of these forces—US liquidity expansion, Chinese fiscal restraint, and Japanese debt stress—marks the end of synchronized cycles and the beginning of a multi-speed, volatile environment.

Analysts warn of structural impacts on credit markets, currencies, and even crypto. Market observers note that a Japanese bond sell-off could trigger significant volatility in stablecoin valuations and Bitcoin, potentially forcing corporate crypto holders to liquidate, creating cascading effects across digital assets.

Meanwhile, in the US, corporate bankruptcies are rising, with 655 filings through October 2025, the highest in 15 years. Shanaka Anslem warns that the reckoning has only begun, as shadow banks and private credit absorb risks that traditional banks rejected, masking underlying vulnerabilities.

With tariffs, interest rate pressures, and fiscal tightening compounding the stress, analysts see 2026 as a year of structural adjustment.

Liquidity injections, market psychology, and geopolitical factors will collide to determine winners and losers across asset classes.

Forces Reshaping Global Finance

Investors should track:

• US RMPs
• Fed rate cuts
• Shadow credit defaults
• Japanese capital repatriation

These forces collectively reshape risk, return, and liquidity in ways not seen since the end of the post-global financial crisis (GFC) low-rate era.

Crypto Market Updates

Key developments to follow:

• Crypto fund inflows hit $716 million as major digital assets lead institutional shift
• Major exchange plots expansion in Asia with fiat support expected in 2026
• Bitcoin price forecasts range widely as market participants debate macroeconomic scenarios
• Prominent analysts give opposing Bitcoin predictions
• Key US economic data to shape crypto sentiment this week
• Regulatory developments forcing compliance overhauls for major exchanges

Crypto Equities Pre-Market Overview