{"id":261452,"date":"2024-10-02T14:19:30","date_gmt":"2024-10-02T14:19:30","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2024\/10\/02\/vivek-unsurprisingly-the-bitcoin-price-follows-global-liquidity\/"},"modified":"2025-06-25T17:11:02","modified_gmt":"2025-06-25T17:11:02","slug":"vivek-unsurprisingly-the-bitcoin-price-follows-global-liquidity","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2024\/10\/02\/vivek-unsurprisingly-the-bitcoin-price-follows-global-liquidity\/","title":{"rendered":"Vivek: Unsurprisingly, The Bitcoin Price Follows Global Liquidity"},"content":{"rendered":"

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What We’re Reading:\u00a0<\/em><\/strong>Bitcoin: A Global Liquidity Barometer<\/strong><\/a><\/p>\n

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I have been intrigued by the significant increase in global liquidity during 2024, driven by extensive money printing and debt expansion, and how it impacts Bitcoin’s price.\u00a0<\/p>\n

Bitcoin is an expression against the government’s monetary expansionist policies, so its price follows global liquidity, as seen here on this chart.<\/a><\/p>\n

It was fascinating to read the recent report<\/a> by Lyn Alden and Sam Callahan analyzing Bitcoin’s correlation to global liquidity. This further reconfirmed my view that more monetary expansion drives more people to Bitcoin, increasing prices.\u00a0<\/p>\n

Their rigorous analysis found that over 12-month periods, Bitcoin’s price moves in the same direction as global liquidity a remarkable 83% of the time. This is higher than any other major asset class, making Bitcoin a uniquely pure barometer for global liquidity trends.<\/p>\n

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The report quantified Bitcoin’s correlation with global M2 money supply, finding a very strong 0.94 overall correlation between May 2013 and July 2024. Bitcoin’s average 12-month rolling correlation was 0.51, while stocks and gold showed moderately high correlations as well in the 0.4 to 0.7 range.<\/p>\n

Of course, Bitcoin’s correlation isn’t perfect. Shorter-term breakdowns can occur around crypto-specific events like exchange hacks or Ponzi schemes collapsing.<\/p>\n

Supply-demand imbalances also cause temporary decoupling when Bitcoin reaches extreme overvaluation levels during market cycle peaks. Yet despite these breakdowns, the long-term relationship persists.\u00a0<\/p>\n

Right now, liquidity is soaring to unprecedented levels, suggesting Bitcoin could soon embark on a massive bull run if this relationship holds. While I believe no model perfectly captures Bitcoin’s complexity, recognizing its role as a monetary canary in the coal mine can lend valuable insight. If history rhymes, Bitcoin’s sirens are ringing loudly that a liquidity-driven boom will soon be underway.\u00a0<\/p>\n

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