Source: Cointelegraph.com NewsKey takeaways:<\/p>\n
Bitcoin\u2019s price closely tracks global liquidity growth, with liquidity explaining up to 90% of its price movements, according to Raoul Pal.
\nIn the long term, global liquidity continues to expand, driven by the increasing debt levels in many countries.
\nOn a shorter timeframe, global liquidity follows a cyclical pattern, with Michael Howell projecting the current cycle to peak by mid-2026.<\/p>\n
Bitcoin (BTC) price is notoriously sensitive to global liquidity. Some analysts go as far as calling their correlation near-perfect, with a lag of about three months. This relationship is fueling the current bullish narrative as BTC price soars back above $100,000, but how long can this trend last? Source: Cointelegraph.com NewsKey takeaways: Bitcoin\u2019s price closely tracks global liquidity growth, with liquidity explaining up to 90% of its price movements, according to Raoul Pal. In the long term, global… <\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[],"_links":{"self":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/128938"}],"collection":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=128938"}],"version-history":[{"count":0,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/128938\/revisions"}],"wp:attachment":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=128938"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=128938"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=128938"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nLiquidity is Bitcoin’s silent price driver
\nRaoul Pal, the founder of Global Macro Investor, recently gave a speech on the strong correlation between Bitcoin and global M2 liquidity. In a recap posted by Paul Guerra, Pal\u2019s message refers to: despite looming concerns\u2014recession risks, geopolitical tensions, and other global stressors\u2014rising liquidity as the dominant force behind asset price action.\u00a0
\nAccording to Pal, expanding liquidity backs up to 90% of Bitcoin\u2019s price action and as much as 97% of the Nasdaq\u2019s performance. Indeed, a chart comparing global M2 (with a 12-week lead) and Bitcoin\u2019s price shows an almost uncanny alignment.
\nGlobal M2 and BTC\/USD. Source: Real VisionPal also frames the issue in personal finance terms. He says there’s an 11% “hidden tax” on all of us, composed of 8% currency debasement and 3% global inflation. He notes,
\n\u201cIf you\u2019re not earning more than 11%\/yr, you\u2019re getting poorer by definition.\u201d
\nBitcoin has returned an average of 130% annually since 2012, despite dramatic drawdowns. That makes it one of the most asymmetric bets of the past decade\u2014and it\u2019s outperformed the Nasdaq by over 99%.
\nWhat drives global liquidity?
\nAt its core, global liquidity is fueled by expanding the money supply. As independent investor Lyn Alden puts it,
\n\u201cFiat currency systems are primarily based on ever-growing debt levels. The money supply continuously grows in every country for this reason.\u201d
\nThis offers a high-level view of global liquidity and suggests its long-term expansion is structural. However, this growth isn’t linear. Over shorter time frames, it fluctuates based on specific drivers. Michael Howell, author of \u201cCapital Wars,\u201d identifies three main drivers currently impacting global liquidity: the US Federal Reserve, the People\u2019s Bank of China (PBoC), and banks lending through collateral markets.
\nGlobal liquidity drivers. Source: Michael HowellHowell also points to indirect influences that act with a lag of 6 to 15 months. These include the world business cycle, oil prices, dollar strength, and bond market volatility. A weak global economy and a softening dollar typically boost liquidity. But rising bond volatility tightens collateral supply and chokes lending, undermining liquidity.
\nRelated: New bull cycle? Bitcoin’s return to $100K hints at \u2018significant price move\u2019
\nHow long will global liquidity rise?
\nMichael Howell believes that global liquidity moves in roughly five-year cycles, and is now on the way to its local peak. He projects the current cycle to mature by mid-2026, reaching an index level of around 70 (below the post-COVID index of 90). That would mark a turning point, with a subsequent downturn being a likely outcome.
\nGlobal liquidity cycle. Source: Michael HowellThe recent growth in global liquidity stems from the rapidly weakening world economy, which is likely to prompt further easing by central banks. The People\u2019s Bank of China has already begun injecting liquidity into the system. The Fed now faces a tough choice: continue fighting inflation or pivot to support an increasingly fragile financial system. At its May 7 meeting, rates were held steady, but the pressure on Chair Jerome Powell is mounting, especially from US President Donald Trump.
\nAt the same time, economic uncertainty is driving up US Treasury yields and fueling bond market volatility, both indicators of collateral scarcity and tightening credit conditions. Over time, these pressures are likely to become headwinds for liquidity expansion. Meanwhile, a looming recession is expected to weaken investor risk appetite, further draining liquidity from the system.
\nEven if a downturn lies ahead in 2026, global liquidity still has room to run, at least through 2025. And that matters for Bitcoin.
\nHowell notes,
\n\u201cThe likely inevitable policy response of \u2018more liquidity\u2019 is a great future omen. It establishes the upward path of persistent monetary inflation that ultimately underpins hedges such as gold, quality equities, prime residential real estate, and Bitcoin.\u201d
\nInterestingly, Howell\u2019s liquidity cycle roughly aligns with Bitcoin\u2019s four-year halving cycle. The former points to a potential peak in late 2025, and the latter in early 2026. If history rhymes again, that convergence could set the stage for a major price move.
\nThis article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.Read More<\/a><\/p>","protected":false},"excerpt":{"rendered":"