Matrixport Investment Research: Rising global liquidity may no longer drive BTC prices

As the global economy gradually recovers, liquidity indicators generally rebound, and global liquidity (especially the total money supply of 28 central banks) is closely related to the price increase of BTC, but this relationship may be gradually ineffective.

The relationship between global liquidity and BTC prices gradually

weakens

In the past, when major central banks such as the Federal Reserve increased their money supply, these new funds flowed into the financial system through the purchase of assets such as government bonds, and eventually flowed to the broader economy, partially entering the cryptocurrency market, driving BTC prices to rise. In theory, an increase in liquidity means an abundant supply of funds, which can support the price of risky assets, especially BTC. However, current market performance shows that the rise in global liquidity has failed to directly drive BTC prices to continue to climb as expected.

The lag effect of liquidity indicators raises doubts

Although the lag effect between money supply growth and BTC price was once considered a reliable predictor, this "13-week" lag period did not have strong theoretical support. BTC traders often predict price trends by observing global liquidity charts, assuming that a surge in liquidity will directly lead to price increases. However, there are certain problems with this assumption. Both BTC and global liquidity have trend changes (non-stationary), which may lead to errors in correlation analysis and misleading investors.

Further analysis found that the comparison between BTC price and global liquidity (such as M2) was misleading. After all, the scale of BTC and global liquidity is huge, and direct comparison of the two is not only without mathematical basis, but may also mislead market expectations.

BTC's relationship with tech stocks has not been strengthened as expected

Over the past seven years, BTC’s correlation with U.S. stock markets (such as Nasdaq) has not yet reached a stable high level. Even with the launch of BTC ETFs (exchange-traded funds), this correlation is still much lower than the 60% level achieved during the COVID period. BTC is still more traded in the market according to its own rules than as an agent for other risky assets such as U.S. technology stocks. Therefore, the effectiveness of over-reliance on global liquidity and other macro indicators to predict BTC trends is weakening.

Lack of clear catalysts, looking for cryptocurrency native drivers

The future trend of BTC still needs to rely on clear market catalysts. In the absence of external push, the BTC market may continue to consolidate, and rising global liquidity is no longer the decisive factor driving price increases. Investors interested in the crypto market should pay more attention to crypto-native drivers, such as changes in crypto policies, technological innovations within the industry, or political leadership supporting cryptocurrencies, which may affect BTC’s price trends more than relying solely on global liquidity indicators.

Disclaimer: The market is risky, so be cautious when investing. This article does not constitute investment advice. Digital asset trading can have great risks and instability. Investment decisions should be made after careful consideration of personal circumstances and consulting a financial professional. Matrixport is not responsible for any investment decisions based on the information provided on this content. ****