When Bitcoin Becomes a Social Pressure Relief Valve: America's Economic Tear and K-shaped Divergence

Author: arndxt

Compiled by: Tim, PANews

The US economy has split into two worlds: financial assets continue to thrive, while the real economy is陷入慢速衰退.

The ISM Manufacturing Index has been in a contraction state for more than 18 consecutive months, setting the longest record since World War II, but the stock market continues to rise, and the reason behind this is that profits are concentrated in monopolistic technology companies and the financial sector.

All of this is caused by the expansion of the balance sheet.

The liquidity of currency continues to drive up the prices of financial assets, while wages, credit, and small business activities remain stagnant.

The result is the formation of a K-shaped economy, which is a cyclical pattern where different economic sectors develop in completely opposite directions.

K-shaped uptrend: The capital markets, asset holders, technology industry, and large enterprises are all showing a soaring trend (profit, stock price, and wealth growth).

K-shaped downturn: the working class, small businesses, and blue-collar industries are facing stagnation or decline.

Growth coexists with pain.

Policy Collapse

Monetary policy has ceased to transmit to the real economy.

When the Federal Reserve lowers interest rates, it boosts stock and bond prices, but does not create new job opportunities or increase wage levels. Quantitative easing policies make it easier for large enterprises to obtain loans, rather than helping the development of small and micro enterprises.

Fiscal policy has also little room for maneuver.

Currently, nearly a quarter of the U.S. government's fiscal revenue is used to pay interest on national debt.

This puts policymakers in a predicament where they have no effective solutions.

If inflation is suppressed by tightening policies, the capital markets will fall into stagnation; if growth is supported by loosening policies, prices will rise again. The entire economic system has become a self-contained entity, and if debt or balance sheets are to be reduced, it will inevitably impact the core assets that maintain economic stability.

Current structure of the capital market

Passive capital flows and high-frequency arbitrage have transformed the public market into a closed-loop liquidity machine.

The importance of fundamental factors has given way to position allocation and volatility mechanisms. Retail investors essentially play the role of counterparties to quantitative funds. This explains why defensive sectors have been abandoned and the valuation multiples of tech stocks continue to expand, as the current market structure rewards quantitative strategies rather than value investing.

The market we designed maximizes price discovery efficiency, but undermines capital efficiency.

The open market has evolved into a self-circulating liquidity machine.

Funds automatically circulate through passive index funds, ETFs, and algorithmic trading → forming a sustained buying pressure that ignores fundamentals.

Price movements depend on capital flow, not value.

High-frequency trading and quantitative funds dominate the daily trading volume, while retail investors actually act as counterparties to these trades. The rise and fall of stocks depend on position allocation and volatility mechanisms.

This is why the technology sector continues to rise while the defensive sector performs poorly.

Social Reflexivity Effect: The Political Cost of Liquidity

The wealth creation in this cycle is concentrated among the top wealthy individuals.

The richest 10% of the population hold over 90% of financial assets, so when the market rises, inequality tends to worsen. Policies that drive up asset prices are eroding the purchasing power of everyone else.

If real wages do not grow and housing costs remain high, voters will ultimately demand change through wealth redistribution or political reform. Both of these avenues will increase fiscal pressure and exacerbate inflation.

The motivation for policymakers is clear: to maintain liquidity, stimulate a market rebound, and call it a recovery. Surface-level efforts have replaced thorough reform. Although the economy is fragile before the next election in the United States, the data on charts looks impressive.

Cryptocurrency serves as a pressure release valve for society

Cryptocurrency is one of the few tools that allows people to store and transfer assets without relying on banks or governments.

Traditional markets have become a closed system: before the public is allowed to enter, large capital has already obtained the majority of profits through private placements.

For the younger generation, Bitcoin is less of a speculative tool and more of a new participation channel: when the entire system is filled with hidden operations, this becomes their only way to stay in the game.

Despite many retail investors suffering heavy losses due to overvalued token issuances and VC sell-offs, core demand remains strong: people still yearn for a transparent, fair, and self-governed financial system.

Outlook

The U.S. economy is caught in a feedback loop: tightening policies lead to recession, which in turn causes panic, followed by a massive injection of liquidity, which then drives up inflation, and this cycle repeats.

As the economic growth data deteriorates and the fiscal deficit expands in 2026, the United States is likely to initiate a new round of easing cycles. The stock market will experience a brief celebration, but unless capital shifts from financial assets to productive investments, the fundamentals of the real economy are unlikely to truly improve.

We are currently witnessing the late symptoms of a financialized economy:

• Liquidity acts as GDP
• The market has become a tool of policy
• Bitcoin has become a social pressure relief valve

As long as this system continues to inject debt cycles into asset inflation, what we will get is not a true recovery, but merely a slow stagnation disguised by the rise in nominal data.