- Bitcoin has many stories attached to it, including an inflation hedge, but since covid, global liquidity indicators or balance sheet expansion/contraction have emerged.
- The net liquidity indicator we covered in our previous insight grew YTD. Over the past year, Bitcoin has been highly correlated with this metric.
net_liquidity = (fed_bal – (tga + rev_repo))
- The balance sheets of the big four central banks have cumulatively increased this year, including Japan, Europe, China and the US, from $25.6 trillion to $26 trillion.
- All the work the ECB and Fed are trying to do with their quantitative tightening is offset by the growth of their balance sheets in China and Japan.
A decrease in order book depth could cause liquidity concerns in the cryptocurrency market, causing prices to move up and down violently.
The post of Bitcoin as an indicator of global liquidity, balance sheet growth, first appeared on CryptoSlate.