Matrixport experts appreciated the effect of global liquidity on the price of BTC

Global liquidity is considered one of the key indicators for predicting the cost of Bitcoin. This indicator includes the money supply of 28 central banks standardized in US dollars. Researchers from Matrixport said: historically there was a correlation between liquidity growth and an increase in the cost of Bitcoin. The logic is that as the world economy expands, the 1st continues to grow, creating favorable conditions for bitcoin and other assets with a high level of risk.

Experts emphasized: when the Federal Reserve System (Fed) increases the M2 mass indicator, new money first enters financial institutions with the purchase of assets such as government bonds. Then they penetrate the economy through lending and investments, and also find themselves on deposits, in money markets and savings accounts. These forms of liquidity together are M2. Only after that can part reach cryptocurrency markets.

“It is believed that between the increase in the money supply and the change in the price of the BTC is a temporary lag, which is usually 13 weeks,” experts emphasized. Many traders monitor global liquidity, assuming that its sharp increase will lead to an increase in prices.

However, according to experts, the hypothesis remains controversial, as it is not supported by strict mathematical calculations. Analysis of bitcoin and global liquidity may look convincing on the graphs, but methodologically this is not always correct. Both indicators change over time, which can lead to false correlations. The difference in the scale of assets ($ 90,000 for BTC against $ 108 trillion of global liquidity) also makes comparisons not always objective.

“Macroeconomic factors still play an important role, therefore, to assess the influence of liquidity, it is necessary to use the correct risk indicators and mathematical methods. Over the past 7 years, the correlation between Bitcoin and the NASDAQ index has grown sharply, ”analysts emphasized. Now it is increasing again, but the launch of Bitcoin-ETF has not yet had a significant impact on this parameter.

Experts believe that without a clear trigger, further market consolidation remains the most likely scenario. The search for drivers or macrofactors with direct influence, such as political support for the industry, can be more effective than orientation to the overall level of liquidity.

Author

Peter Ivanov