quick take

  • 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.

Balance sheet, liquidity and BTC: (Source: Trading View)
Balance sheet, liquidity and BTC: (Source: Trading View)

The post of Bitcoin as an indicator of global liquidity, balance sheet growth, first appeared on CryptoSlate.

By Jules

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