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There was a time when a single tweet could move Bitcoin by 10%. When a celebrity endorsement sent token prices through the roof overnight. When “to the moon” counted as an investment thesis for millions of retail crypto investors around the world.

Today, that market has been replaced by more serious, more structural, and more interesting market participants. The next Bitcoin rally will not be driven by narrative. It will be driven by liquidity. And if you don’t understand how liquidity moves, you will keep misreading every crypto cycle that follows.

What the Numbers Are Telling Us

Over the past eight months, more than $10 billion has moved out of Bitcoin spot ETFs, and that exodus has been a major driver of the downturn we’re witnessing. In 2024, inflows into those same ETFs powered Bitcoin to new all-time highs. Institutional capital pulled back, the pillar supporting the rally faded, and retail investors simply did not have the conviction to hold the market up on their own.

Spot ETFs now hold 6-7% of circulating supply, which means every billion dollars of net flow ripples directly into spot prices and through the rest of the crypto market.

How the Market Grew Up

The 2021 bull run was the last great hype-driven market. Retail FOMO, social media momentum, and speculative excess pushed Bitcoin to its then all-time high. Then came the unravelling of Luna, Celsius, and FTX. Each collapse eroded the casual investor’s willingness to act on hype without scrutiny.

At the same time, the market’s composition changed underneath it. The SEC’s approval of spot Bitcoin ETFs in January 2024 brought institutional capital into the space through regulated vehicles. BlackRock’s iShares Bitcoin Trust alone commands approximately $43 billion in assets under management as of June 2026.

These are investors who allocate based on macro conditions, rate environments, and portfolio construction frameworks with a long-term view, the same forces that move equity and bond markets.

Liquidity Is the Variable That Matters Now

Empirical research shows a significant strengthening in the relationship between global M2 money supply growth and Bitcoin price appreciation, with roughly a 90-day lag and correlation coefficients reaching 0.78 during the 2020-2023 period.
Put simply, when global liquidity expands, Bitcoin goes up. When it contracts, Bitcoin comes under pressure. That three-month lag means the direction of global money supply today is a leading indicator of where Bitcoin is headed next quarter, whether you’re watching for it or not.
Stronger-than-expected inflation readings and elevated bond yields have complicated the picture for Federal Reserve policy. Persistent energy price pressures and geopolitical instability now have investors worried that rate cuts could be delayed, and that makes for a less supportive environment for risk assets like Bitcoin.

What the On-Chain Data Is Actually Saying

Here is where it gets interesting. Beneath the price weakness, the network is telling us a different story altogether. CryptoQuant’s Bitcoin Network Activity Index has climbed steadily since January and recently hit its highest level since late 2024. Daily Bitcoin transactions have crossed 800,000, nearing the highs of the previous bull cycle.

Even the selling pressure from ETF redemptions has not triggered a rush of coins onto exchanges for liquidation, which tells you that some of these outflows are internal portfolio rebalancing, not investors walking away from Bitcoin.

What the Next Rally Needs

Any rotation back into growth positioning would likely pull Bitcoin along with it, re-anchoring the asset to the liquidity backdrop. An ETF flow reversal would provide direct support to prices.

Watch for a softening in Fed language, easing inflation data, and a resolution to the geopolitical tensions that have kept oil prices elevated and rate-cut expectations suppressed. Any one of these could meaningfully improve liquidity conditions, and when liquidity returns, Bitcoin has consistently been among the first assets to reflect it.

The next leg of this cycle will not announce itself through celebrity endorsements or viral posts. It will show up quietly, in ETF flow data, in M2 expansion numbers, and in what the bond market is telling us about where rates are headed.

The investors who stand to benefit most from the next Bitcoin rally are the ones watching the Fed, tracking ETF flows, and understanding that Bitcoin’s price today is largely a function of how much capital the global financial system is willing to allocate to risk assets.

(The author Prateek Gupta is Head of Business, Mudrex)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

For decades, investors have relied on forecasts of economic growth, consumer demand and corporate earnings to identify winning investments. However, renowned financial historian and investment strategist Edward Chancellor argues that a far more reliable way to generate long-term returns is by studying the capital cycle—an approach that focuses on the supply side of an industry rather than attempting to predict demand. According to Chancellor, understanding how capital enters and exits industries can help investors identify opportunities that the broader market often overlooks.

In his book, “Capital Returns“, Edward Chancellor explains the investment philosophy employed by Marathon Asset Management in London between 2002 and 2015. The book advocates the capital cycle approach, arguing that investors can achieve superior long-term returns by focusing on industry supply dynamics and capital allocation rather than relying solely on demand forecasts.

Looking Beyond Demand

Traditional investing tends to revolve around estimating future demand. Investors spend significant time predicting sales growth, consumer spending patterns and economic trends. Chancellor believes this approach has limitations because demand is notoriously difficult to forecast with precision.

Instead, the capital cycle approach shifts attention to supply. It examines how much capital companies are investing, whether industry capacity is expanding or shrinking, and how these changes are likely to affect future profitability. Since supply trends are generally easier to observe than demand, they can offer a stronger foundation for long-term investment decisions.

How the Capital Cycle Works

Every industry experiences periods of expansion and contraction.

When companies earn high profits, they attract competitors and fresh investment. Existing firms increase capacity while new entrants join the industry. Over time, this excess investment creates oversupply, intensifies competition and puts pressure on prices and profit margins.

As profitability declines, weaker players exit the market, investment slows and industry capacity contracts. Reduced supply eventually restores pricing power and profitability, setting the stage for a new cycle of growth.

Investors who can identify these turning points before the broader market has an opportunity to benefit from improving fundamentals and attractive valuations.

Why Markets Often Miss the Cycle

Chancellor believes markets frequently fail to recognize changes in the capital cycle because investors focus excessively on short-term developments. Quarterly earnings, macroeconomic headlines and demand forecasts often dominate investment decisions, while structural changes in industry supply receive far less attention.
This creates opportunities for patient investors who are willing to look beyond near-term uncertainty and study how capital allocation is reshaping an industry’s competitive landscape.

Behavioural Biases That Influence Investors

The capital cycle approach also explains why investors repeatedly make similar mistakes.One common error is competition neglect, where investors underestimate how increased investment across an industry will eventually reduce profitability.

Another is base-rate neglect, where market participants focus only on current conditions without considering how past investment decisions continue to influence today’s returns.

Chancellor also points to narrow framing, where investors analyse companies in isolation instead of comparing them with similar situations across industries or history. Finally, extrapolation bias causes investors to assume current trends will continue indefinitely, even though business cycles are inherently cyclical.

Characteristics of Attractive Capital Cycle Opportunities

According to Chancellor, the most attractive opportunities are often found in industries where capacity growth has slowed, competition has become more disciplined and supply conditions are improving.

Industries with a limited number of rational competitors, high barriers to entry, sensible capital allocation and pricing discipline tend to generate superior long-term returns. Conversely, sectors experiencing aggressive capacity expansion or irrational competition often see profitability deteriorate over time.

The Importance of Management

A company’s management plays a crucial role in the capital cycle.

Strong management teams allocate capital prudently rather than pursuing growth for its own sake. Investors should evaluate how companies approach capital expenditure, research and development, acquisitions, debt management, share buybacks and equity issuance. Businesses that allocate capital efficiently are generally better positioned to create sustainable shareholder value throughout the cycle.

Why Long-Term Investors Have an Edge

One of Chancellor’s central arguments is that long-term investing works because there is less competition for information that remains valuable over many years.

While most market participants concentrate on quarterly earnings and short-term news, long-term investors can benefit by studying structural industry trends, capital allocation decisions and changes in supply dynamics. These insights often have a much longer shelf life and can produce superior returns over an extended investment horizon.

Key Takeaways for Investors

The capital cycle approach reminds investors that profitability is determined not only by demand but also by how much capital an industry attracts. Excess investment eventually destroys returns, while disciplined investment and shrinking capacity often lay the foundation for future profitability.

Rather than chasing popular sectors during periods of peak optimism, long-term investors should monitor supply trends, management quality and capital allocation decisions. By identifying industries where the capital cycle is turning in favour of stronger returns, investors can position themselves ahead of the market and improve the odds of generating sustainable long-term wealth.

Copper’s blistering rally to a record high in 2026 is beginning to reshape how manufacturers think about one of the world’s most critical industrial metals. As soaring prices threaten margins, companies are increasingly turning to aluminium, a cheaper and lighter alternative, for applications that have traditionally relied on copper.

The shift comes after copper prices surged to a record high in late January, touching nearly $15,000 per tonne, driven by supply shortages and surging demand from the green-energy transition and data centres. Aluminium, by comparison, trades at roughly a quarter of copper’s price, making it an increasingly attractive substitute where technical requirements allow.

The transition is no longer theoretical. Rising copper prices are prompting automakers and manufacturers to expand the use of aluminium wiring as a lower-cost and lighter alternative. Companies such as Ferrari and BMW are already increasing aluminium’s adoption across new vehicle models, underscoring how economics and engineering are converging to accelerate substitution.

Also read: Ferrari and BMW join Tesla, China in switch from copper to cheaper aluminium

The move has been driven by a widening price gap between the two metals. The copper-to-aluminium price ratio has climbed above 4.2, making aluminium a significantly more economical option for electrical wiring. Although aluminium offers around 61% of copper’s electrical conductivity, its cost allows manufacturers to reduce material pressures by using thicker aluminium cables wherever design requirements permit.

Weight has emerged as another decisive factor, particularly in electric vehicles. Copper is around 3.3 times heavier than aluminium, making the white metal an attractive option for improving vehicle efficiency and extending driving range without compromising functionality.
Ferrari introduced aluminium wiring in its 296 Hybrid sports car last year before extending its use to additional models, including the recently launched Luce electric vehicle. According to the company, the transition has reduced wiring weight by 15 to 20%. Ferrari’s Head of Research and Development, Dario Esposito, said the company selected aluminium primarily for its technical advantages and weight reduction rather than its lower cost.

Will the trend last?

Analysts at JPMorgan estimate the ongoing substitution will affect around 2% of global copper demand this year. Under one scenario, that figure could rise to as much as 6% by 2030 as forecasts for copper supply continue to fall short of demand projections for more than a decade.
According to an HDFC Securities report, the commodity bear market between 2011 and 2020 severely damaged the supply pipeline across the resource sector. Mining capex fell more than 40% from peak levels, oil and gas exploration spending stagnated, and ESG-related pressures further restricted new project development. Discoveries of new tier-1 copper, oil and gas deposits have effectively flatlined since 2015.

At the same time, demand has accelerated sharply. Electrification, artificial intelligence, defence spending and emerging market urbanisation are all deeply commodity-intensive trends. Structurally constrained supply, coupled with rigid long-term demand, typically pushes baseline market-clearing prices higher. According to the report, current conditions resemble the early stages of previous multi-year commodity cycles.

Read more: ‘Higher-for-longer’ aluminium cycle to lift producer stocks

Iran conflict troubles

The Iran conflict has added another layer of pressure to an already strained supply picture. One of the less-discussed drivers behind the recent rally is the growing shortage of sulfuric acid, a key input in copper extraction and refining, particularly in heap leaching operations. Nearly half of the world’s seaborne sulfur supply originates from the Middle East, and disruptions around the Strait of Hormuz have significantly tightened availability.

Chile’s changing copper production dynamics have further complicated global supply calculations. As the world’s largest copper producer, operational disruptions, water scarcity and the absence of major new high-grade discoveries have constrained output growth. This remains a critical variable as global supply chains struggle to keep pace with rising demand for energy transition metals.

Aluminium’s own rally

Even as aluminium benefits from copper substitution, the metal is increasingly showing signs of entering a powerful structural bull cycle of its own. According to a Bloomberg report in June, concerns among traders are rising that Chinese aluminium smelters may be asked to curb production as authorities intensify scrutiny of energy consumption and emissions across major industries.

Chinese smelters have been operating at full capacity amid a global supply shortage worsened by the Middle East conflict. Aluminium prices on the LME have climbed steadily since the war began in late February, with supplies from the region disrupted due to the effective blockade of the Strait of Hormuz.

Morgan Stanley said the medium-term demand-supply outlook for aluminium remains constructive, supported by strong sustainability-linked demand and constrained supply growth resulting from China’s smelter caps and slower capacity expansion elsewhere.

The brokerage added that near-term factors, including China’s supply discipline, disruptions in the Middle East and elevated energy costs, are likely to keep prices firm. It also pointed to favourable positioning on the global cost curve and low inventories outside the US as factors that could limit downside risks.

India push

Analysts also believe India is entering a multi-year growth cycle that is expected to drive robust demand for both aluminium and copper.
Morgan Stanley described aluminium as its preferred base metal, citing a tighter demand-supply balance. Supply growth remains constrained by China’s capacity caps, slower ramp-up in Indonesia due to power limitations and limited expansion elsewhere.

Recent disruptions in the Middle East have tightened markets further, with some supply losses likely to persist because of long restart timelines.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Kuaishou Technology’s 1024 -0.09%decrease; down pointing triangle Kling has raised $2.80 billion from investors, as the short-video company seeks to spin off and list its artificial-intelligence video unit.

Venture capitalists and other investors have injected 19.04 billion yuan, or $2.80 billion, into Kling, Kuaishou said late Thursday. Additional investors could still join this funding round, potentially taking the total investment as much as $3 billion, it added. Kuaishou’s stake in Kling could fall to as low as 68.33% after the capital injection.

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