- Global liquidity has risen sharply in anticipation of a likely increase in the US money supply
- Given the historic BTC pumping amid the liquidity surge, is another rally likely?
There is an increasingly favorable macro setup for Bitcoin [BTC]especially from the perspective of liquidity (money supply). Overall global liquidity has actually fallen, according to Charles Edwards, founder of crypto hedge fund Capriole Investments. exploded now above a four-year consolidation level.
“The global money supply is exploding. Moreover, we have just come out of a massive four-year consolidation period. What do you think this means for Bitcoin?”
Source: Capriole Investments
While several factors can influence BTC prices, the world’s largest digital asset is a known liquidity junkie. Such a spike in global liquidity could provide BTC with upside potential.
For context, the cycle highs in 2017 and 2021 coincided with a rebound in global liquidity as noted by one market analyst – Francois Quinten.
“Global liquidity is about to increase. This also applies to #Bitcoin 💥”
Source: X/Quinten
US liquidity to fuel BTC prices
The recent increase in global liquidity is not surprising given the onset of quantitative easing as central banks cut interest rates. Canada and Great Britain, among others, have also lowered their interest rates.
The US is expected to begin Fed rate cuts in September, which could further boost global liquidity and impact cryptocurrency prices. At the time of writing, interest rate traders were prices a Fed rate cut of almost 60%-40% by 25 and 50 basis points respectively.
In other words, traders are now very convinced of a Fed rate cut in September.
Source: CME Fed Watch tool
In addition to the Fed’s rate cut, the US liquidity injection would come from the more than $300 billion in T-bills that the US Treasury will issue between now and the end of the year.
For those unfamiliar, treasury bills are used by the government to raise money to cover budget deficits required for overall expenditure. In short, positive net Treasury issuance will increase U.S. liquidity.
According to BitMEX founder Arthur Hayes, this is American liquidity line-up would push BTC towards $100,000 and break its sideways downward trajectory.
“I expect crypto to leave its sideways to downward trajectory starting in September.”
In short, BTC could see a massive price increase starting in September.
Meanwhile, at the time of writing, the world’s largest cryptocurrency was trading at $60.8k, while BTC faced a short-term sell wall at $63k.