- BTC’s current price repricing coincides with a dip in US liquidity.
- QCP, an asset trading firm, sees flat funding rates as a great opportunity for bulls.
Bitcoin [BTC] is a liquidity junkie and can quickly get stuck if there isn’t enough to survive on.
According to pseudonymous crypto analyst Ted Talks Macro, the correlation between BTC and traditional liquidity is currently even stronger.
The analyst noted That,
“The correlation between BTC and traditional market liquidity remains strong. Slower periods of price action coincide with plateaus in available ‘liquidity’ like those posted in February.”
Source: X/Tedstalksmacro
The chart showed that the massive rally in 2021 coincided with a spike in liquidity (USD Bank Reserves delta), highlighted in green.
Similarly, the bear market or crypto winter of 2022 occurred when liquidity was negative. So far, the rally in the first quarter of 2024 has also been accompanied by a rise in liquidity.
Unfortunately, the slight dip in liquidity in the second quarter marked the current stagnation in BTC prices. This underlines that BTC prices are subject to the vagaries of US cash flow and the global money supply.
Will Bitcoin resume its rally as liquidity improves?
Most analysts predict that liquidity space will improve in the second half of 2024.
BitMEX founder Arthur Hayes has previously seen the US election as a ripe opportunity for the US Treasury Department to inject more liquidity.
Ted Talks Macro shares a similar sentiment, but predicts that fiscal liquidity could be more favorable later in 2024.
“The outlook for bank reserves is that they will decline by mid-year – the third quarter – as the RR facility has been exhausted…However, expect the green bars to return soon after that as financial conditions will undoubtedly ease in 2025.”
However, institutional crypto asset trading firm QCP viewed the depressed macro conditions as the perfect opportunity to go long. Part of the QCP’s Telegram Statement read,
“Perp funding is largely flat, with many Altcoins showing negative funding, opening a path for speculators to build leveraged long positions.”
If the macro plays out as mentioned, the April market pullback could be one of the best discount windows for late bulls.