Bitcoin “A Global Liquidity Barometer”

The JellyC Team would like to highlight an article written by Sam Callahan and commissioned by Lyn Alden, "Bitcoin: A Global Liquidity Barometer". The article examines how Bitcoin's price movements closely align with global liquidity conditions. Bitcoin moves in the direction of global liquidity 83% of the time in any given 12-month period, which is higher than any other major asset class, making it a strong barometer of liquidity conditions. Bitcoin’s correlation with global liquidity is high but not immune to short-term deviations caused by idiosyncratic events or internal market dynamics, especially during periods of extreme valuation. Combining global liquidity conditions with Bitcoin on-chain valuation metrics provides a more nuanced understanding of Bitcoin cycles, helping investors identify moments when internal market dynamics may temporarily decouple Bitcoin from liquidity trends.

Directional Alignment with Global Liquidity in 12-month Periods

Understanding how asset prices respond to changes in global liquidity has become crucial for investors aiming to enhance returns and manage risk effectively. In today's markets, asset prices are increasingly shaped by central bank policies directly influencing liquidity conditions, making traditional fundamentals less dominant in driving asset valuations.

This phenomenon has been particularly pronounced since the Global Financial Crisis (GFC) 2008. Unconventional monetary policies have emerged as the dominant force moving asset prices. By manipulating liquidity levers, central banks have essentially turned the market into a singular, liquidity-driven trade. Economist Mohamed El-Erian encapsulated this situation by stating that central banks have become "the only game in town."

Legendary investor Stanley Druckenmiller echoed this sentiment when he remarked:

 "Earnings don’t move the overall market; it's the Federal Reserve Board... focus on the central banks and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets."

Given this backdrop, it has become imperative for investors to understand how to measure global liquidity and analyze how different assets respond to changes in liquidity conditions. This knowledge is essential for navigating markets that are increasingly driven by liquidity dynamics rather than traditional fundamental factors.

JellyC uses liquidity readings to underpin the long-term approach to investing in digital assets. We measure short-term deviations using on-chain metrics such as the fear and greed index and the MVRV Score.

Article written by Sam Callahan and Commissioned by Lyn Alden


Disclaimer

This article ("Article") has been prepared for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any financial product or service. This Article does not form part of any offer document issued by JellyC Pty Ltd (CAR Number 001293184), a corporate authorised representative of TAF Capital Pty Ltd (ACN 159 557 598, AFSL 425925). Past performance is not necessarily indicative of future results, and no person guarantees the performance of any financial product or service mentioned in this Article, nor the amount or timing of any return from it.

This material has been prepared for wholesale clients, as defined under Sections 761G and 761GA of the Corporations Act 2001 (Cth), and must not be construed as financial advice. Neither this Article nor any offer document issued by JellyC Pty Ltd or TAF Capital Pty Ltd takes into account your investment objectives, financial situation, or specific needs.

The information contained in this Article may not be reproduced, distributed, or disclosed, in whole or in part, without prior written consent from JellyC Pty Ltd. This Article has been prepared by JellyC Pty Ltd, which, along with its related parties, employees, and directors, makes no representation or warranty as to the accuracy or reliability of the information provided and accepts no liability for any reliance placed on it. Prospective investors should obtain and review the relevant offer documents before making any investment decision.

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