Bubble, Cockroach, and the Rain Cycle: Decoding the Turning Points of the Global Market in 2025

The global financial markets in 2025 have discussed stories similar to the rain cycle—some periods of water flooding, others drying up completely. From a 367% surge in certain securities to sudden collapses of popular trends, markets have revealed repetitive and concerning cycles: confidence → capital inflows → price bubbles → risk exposure → explosion.

For investors in the digital currency era, 2025 is filled with “high-confidence bets” and “rapid reversals.” From bond trading rooms in Tokyo to currency traders in Istanbul, markets have brought both enormous profits and sharp losses. Gold prices soared to record highs, mortgage stocks fluctuated like meme stocks, and investors faced rapid changes they couldn’t keep up with.

But behind this chaos lies a repetitive pattern—market cycles that tell a story and warn us about hidden risks lurking in the shadows, like cockroaches hiding everywhere.

Digital Assets and Politics: Short-lived Bubbles Fueled by Political Power

In the cryptocurrency world, investor enthusiasm tied to politics has become a major market driver. When Donald Trump rose to the presidency, the belief that “all assets related to Trump will rise in value” became a widely held view.

Companies and tokens associated with the Trump brand recently surged: Trump Meme coins skyrocketed after launch; Melania Trump launched her own private token; and World Liberty Financial, linked to the Trump family, began trading WLFI tokens, followed by other transactions like American Bitcoin, a crypto mining firm of Eric Trump that entered the stock market in September.

However, the story of short-lived political power was over by December 23. Trump Meme coins lost over 80% of their value from their January peak; Melania’s Meme coins fell nearly 99%, and American Bitcoin stocks declined about 80%.

“Politics may generate short-term popularity, but it cannot prevent the law of speculation,” this strategy reveals a brutal cycle: confidence → leveraged buying → price surge → liquidity reduction → explosion. While Bitcoin remains a key indicator of the industry, it also tends to record annual losses after reaching its peak in October.

AI Stocks and “Short Cycles”: When Burry Spots the First Cockroach

After a more-than-three-year rise in AI stocks, renowned hedge fund manager Michael Burry, known for predicting the 2008 crisis, issued a warning in November.

Burry disclosed that he held put options on Nvidia and Palantir Technologies at strike prices 47% to 76% below their current stock prices. This disclosure became a key signal: the AI market, which attracted massive capital for just a few giants, was beginning to face overvaluation questions.

“Markets dominated by a few AI stocks, with massive passive capital inflows and low volatility,” created a bubble full of risks. Burry saw the first cockroach—and experience shows, when you see one cockroach, there are usually more hiding. He designed precise trades: buying put options on Palantir at $1.84, aiming to profit from downward moves.

Profits materialized: those options surged 101% in less than three weeks, revealing the gloom beneath the market’s bright bi-annual.

European Defense Bubble: When Geopolitical Cycles Drive Capital

As the digital bubble burst, a new bubble was forming elsewhere—this time in European defense stocks.

Geopolitical shifts have driven broad buying: Trump’s plans to cut Ukraine’s military budget led Europe to significantly increase defense spending. As of December 23, Germany’s Rheinmetall AG stock rose about 150% since the start of the year, and Italy’s Leonardo SpA increased over 90%.

Previously, many fund managers avoided defense stocks due to ESG principles (Environmental, Social, Governance), but now they have shifted their perspective. Sycomore Asset Management announced, “We reintroduced defense assets into ESG funds earlier this year. Paradigms have shifted, and we must protect our values.”

Various defense stocks—from eyewear manufacturers to chemical producers—were bought with heavy capital. Bloomberg’s European defense index increased over 70% since the beginning of the year.

But this story also warrants study: “Reputational burden” has shifted to “public good” as geopolitics change. Capital flows often precede ideological shifts. This bubble may last longer than others because it is driven by genuine demand, yet it remains part of the cycle.

Carry Trades Unravel and the “Echo” of Cross-Border Transactions

When leading assets fade, investors look elsewhere in the cycle. In 2024, Turkey’s carry trade performed exceptionally well: Turkish bonds yielded over 40%, and the central bank promised to keep the currency stable.

Many investors borrowed abroad at low costs and bought high-yield Turkish assets. Billions of dollars flowed in. But on March 19, Turkish police raided the opposition mayor’s house, large protests erupted, and the Turkish lira was sold off within minutes.

The central bank couldn’t intervene. That month, the lira depreciated about 17% against the dollar. Leverage was used to cut the position size. When that moment arrived, the “confidence”—the only foundation of this trade—collapsed.

Credit Management: The Cycle of Hope and Despair

The epicenter of hidden risks is the credit markets. In 2025, investors learned harsh lessons about credit risk. Companies once considered normal faced trouble. Saks Global restructured $2.2 billion in bonds, which now trade below 60% of face value.

New Fortress Energy and Tricolor lost billions in value. In some cases, under-exploration was the problem; in others, complex fraud or multiple collateral pledges.

JPMorgan Chase already faces “cockroaches” in credit. CEO Jamie Dimon warned in October: “When you see one cockroach, there are likely more hiding in the shadows.”

This “cockroach” risk signals a new cycle. Over recent years, low default rates and easy monetary policy have lowered lending standards—basic checks, multiple collateral pledges, and promises of support for lenders have all been relaxed.

Fannie Mae and Freddie Mac: The Resurrection of the “Toxic Twins”

The climax of this cycle is the momentum of reversed investment. After years of anticipation, Bill Ackman and other investors received hope when the new government announced plans to push Fannie Mae and Freddie Mac onto the stock exchange.

From the start of the year to their September peak, both companies’ stocks surged 367%—one of the biggest gains of the year. But the story is not over. Even Michael Burry—former Fannie Mae speculator—changed his view and announced in December a positive outlook in a lengthy 6,000-word article.

The lingering question remains: how long will this confidence last? The market has shown us that confidence can change rapidly.

Investors Between the Rain: Lessons from the 2025 Cycle

The rain cycle tells an unpredictable story for markets: when confidence is high, capital flows in, and investors leverage up. Prices bubble, warning signs appear (like the first cockroach), markets start to retreat, liquidity dries up, and finally, an explosion.

2025 has repeatedly demonstrated this cycle—from Trump’s digital bubble, to Europe’s geopolitical bubble, Turkey’s carry trade, credit cycles, and the Fannie Mae/Freddie Mac revival—same pattern. Confidence, prices, tremors, explosion.

Even the most prudent investors, like Michael Burry and Jim Chanos, have warned us. They see the cockroaches and conclude that market tremors are telling us: “There are more.”

The rain cycle continues onward into 2026 and beyond. Capital will flow in, bubbles will form, and cockroaches will appear. Survivors are those who understand this cycle and know when to enter and exit, not those who believe this time is “different.”