First Bull Market of 2026: Macro Drivers and Transmission Mechanisms in Crypto Markets—Liquidity, Interest Rates, and Risk Asset Rotation

⚠ This article is a multi-asset digital asset research piece and does not constitute investment advice. Investing involves risk; please make decisions prudently.

Core conclusion: The first crypto bull market since 2020 in 2026 may be driven by global liquidity easing, declining interest rates, and a recovery in risk appetite, but the transmission paths of these factors carry uncertainty.

#What are the macro drivers of the first crypto bull market in 2026?

#How does global liquidity easing affect crypto assets?

Global liquidity easing typically means lower funding costs and ample overall market liquidity. In such an environment, investors' willingness to allocate to high-risk assets may strengthen, and crypto assets, as a high-volatility asset class, may attract some incremental capital. However, liquidity easing does not necessarily lead to crypto asset appreciation; regulatory and market sentiment factors must also be considered.

#What is the transmission effect of declining interest rate expectations on risk assets?

Declining interest rate expectations lower the discount rate, theoretically raising the present value of risk assets. At the same time, lower rates may reduce the attractiveness of traditional fixed-income assets, prompting capital to seek higher-yielding risk assets, and the crypto market may be one of the beneficiaries. However, declining rates may also reflect economic weakness, thus dampening risk appetite, so the transmission effect is not one-way.

#What are the trigger conditions for a recovery in risk appetite?

A recovery in risk appetite usually requires improved economic growth expectations, stable inflation expectations, and reduced policy uncertainty. The emergence of these conditions may prompt investors to shift from defensive assets to risk assets, and the crypto market may receive capital inflows. However, the specific thresholds for trigger conditions are difficult to quantify, and their weights vary across market environments.

#How does liquidity transmit to the crypto market?

#What are the transmission channels from traditional financial market liquidity to the crypto market?

The transmission of traditional financial market liquidity to the crypto market occurs mainly through bank credit, changes in money supply, and shifts in investor risk appetite. Bank credit expansion may increase overall market liquidity, and some funds may flow into the crypto market through compliant channels. However, transmission efficiency is affected by financial regulation, capital controls, and the maturity of crypto market infrastructure.

#What is the relationship between stablecoin issuance and crypto market liquidity?

Stablecoins serve as an internal liquidity medium in the crypto market, and their issuance may reflect external capital inflows. An increase in stablecoin issuance usually means more fiat funds entering the crypto market, potentially boosting market liquidity. However, stablecoin issuance can also be influenced by internal factors such as collateral adjustments or algorithmic stablecoin mechanisms, so it cannot be simply equated.

#What are the paths and constraints for institutional capital inflows?

Institutional capital inflows into the crypto market occur mainly through compliant custody fee, exchange-traded products (ETPs), and over-the-counter trading. However, institutional allocation to crypto assets still faces constraints such as custody fee security, regulatory compliance, and accounting treatment, which may limit the scale of inflows. Additionally, institutional risk management processes and investment committee decision cycles may delay capital inflows.

#How does the interest rate cycle affect crypto asset valuation?

#What is the relationship between real interest rates and crypto asset prices?

Rising real interest rates generally suppress the valuation of non-interest-bearing assets because the opportunity cost of holding them increases. Crypto assets, being non-interest-bearing, may be relatively sensitive to changes in real interest rates. However, crypto assets are also influenced by network effects, technological developments, and other factors, so real interest rates are not the sole determinant.

#How does the Fed's policy path affect crypto market sentiment?

Changes in the Fed's policy path can trigger fluctuations in crypto market sentiment. For example, rising expectations of rate hikes may lead to selling of risk assets, while dovish signals may boost sentiment. Uncertainty about the policy path itself may also increase market volatility. However, the crypto market's reaction to Fed policy may vary due to differences in market structure and participants.

#What is the mechanism by which interest rate changes affect leveraged capital costs?

Interest rate changes affect the cost of leveraged capital, thereby influencing the activity of the perpetual futures market. When rates rise, the cost of leveraged capital increases, potentially reducing trading activity in the perpetual futures market; when rates fall, the cost decreases, potentially stimulating trading. However, leveraged capital costs are also influenced by factors such as platform how does perpetual futures funding rate work and margin requirements, with interest rates being only one component.

#What role does the crypto market play in risk asset rotation?

#How does the correlation between crypto assets and US equities change?

The correlation between crypto assets and US equities may rise during extreme risk appetite conditions. During market panic or extreme optimism, the two may move in sync; in normal market environments, the correlation may be lower. However, correlation is not constant and may be driven by common macro factors rather than causal relationships.

#What are the conditions for capital rotation from traditional risk assets to the crypto market?

Capital rotation from traditional risk assets to the crypto market typically requires improved relative return expectations and a loose liquidity environment. When the expected returns of crypto assets exceed those of traditional risk assets and market liquidity is ample, capital may flow into the crypto market. However, rotation also depends on investors' perception and acceptance of crypto assets' risk-return characteristics.

#What are the patterns of sector rotation within the crypto market?

Sector rotation within the crypto market is influenced by narratives and capital flows. For example, sectors such as DeFi, Layer2, AI, and Meme may take turns performing at different stages, with rotation rhythms closely tied to market sentiment and capital flows. However, sector rotation patterns are not stable and may be affected by unexpected events.

#What are the similarities and differences between this bull market and historical cycles?

#How does the macro environment differ from the 2020-2021 bull market?

Compared with the 2020-2021 bull market, the current macro environment has differences, such as higher inflation levels and limited policy space. The previous bull market benefited from extremely loose monetary policy and fiscal stimulus, while the current policy environment may be more complex. However, the exact degree of difference needs to be assessed with real-time data, and situations vary across economies.

#How do changes in institutional participation affect transmission mechanisms?

Increased institutional participation may alter market volatility characteristics. Institutional investors generally place more emphasis on risk management and compliance, and their participation may reduce market volatility, but it may also bring more complex transmission mechanisms, such as the impact of derivatives hedging on spot markets. However, institutional behavior can also amplify market volatility, such as concentrated deleveraging.

#How does the regulatory environment change liquidity transmission paths?

Stricter regulation may limit some traditional liquidity entry channels. For example, regulation of stablecoins may affect their issuance and redemption, and compliance requirements for exchanges may raise the threshold for institutional participation, thereby changing liquidity transmission paths. However, regulation may also provide a clearer framework and attract compliant capital.

#What are the main uncertainties and risks in this research?

#What is the impact of lagging macro data on judgment?

Lagging publication of macro data may lead to misjudgment. For example, GDP, inflation, and other data are usually released with a lag, and analyses based on such data may not promptly reflect the latest economic conditions, affecting judgments about market trends. Additionally, data revisions may alter previous conclusions.

#What are the risks of breaks in the liquidity transmission chain?

Obstruction at any link in the liquidity transmission chain may weaken the overall effect. For example, contraction in bank credit, restrictions on stablecoin issuance, or slowdown in institutional capital inflows may interrupt the transmission of liquidity to the crypto market. Moreover, internal events in the crypto market (such as exchange risks) may also cause transmission interruptions.

#How do black swan events impact transmission mechanisms?

Black swan events such as geopolitical tensions or sudden regulatory changes may alter risk appetite and cause capital flows to reverse. For example, an unexpected regulatory ban may trigger panic selling in the market, breaking existing transmission mechanisms. Black swan events are difficult to predict but should be considered within a risk framework.

#FAQ

Q: What are the main macro drivers of the crypto bull market in 2026? A: The main drivers may include global liquidity easing, declining interest rate expectations, and a recovery in risk appetite, but the transmission paths of these factors carry uncertainty and need to be assessed with real-time data.

Q: How does liquidity transmit from traditional financial markets to the crypto market? A: It is transmitted mainly through channels such as stablecoin issuance, institutional capital inflows, and shifts in investor risk appetite, but transmission efficiency is constrained by regulation and infrastructure, and there are risks of breaks.

Q: How does the interest rate cycle affect crypto asset valuation? A: The interest rate cycle affects crypto asset valuation through real interest rates, market sentiment, and leveraged capital costs, but crypto asset valuation is also influenced by other factors, and real interest rates are not the sole determinant.

Q: How is this bull market different from the 2020-2021 bull market? A: The current macro environment differs from the previous cycle, such as higher inflation levels and limited policy space. Increased institutional participation and stricter regulation may also change transmission mechanisms, but specific impacts need to be dynamically assessed.

Q: What are the main uncertainties faced by this research? A: Main uncertainties include lagging macro data, breaks in the liquidity transmission chain, and black swan events, which may require dynamic revision of conclusions.