Matrixport Research: The rise in global liquidity may no longer drive BTC prices up

As the global economy gradually recovers, liquidity indicators have generally rebounded, 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 weakening.

The Relationship Between Global Liquidity and BTC Prices is Gradually Weakening

In the past, when major central banks like the Federal Reserve increased the money supply, these new funds flowed into the financial system through the purchase of assets such as government bonds, eventually reaching the broader economy, with some entering the cryptocurrency market, driving up BTC prices. Theoretically, an increase in liquidity means ample funding supply, which can support the prices of risk assets, especially BTC. However, current market performance indicates that the rise in global liquidity has not directly driven BTC prices to continue climbing as expected.

The Lagging Effect of Liquidity Indicators Raises Questions

Although the lagging effect between money supply growth and BTC prices was once considered a reliable predictive indicator, this "13-week" lag period lacks 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, this assumption has certain issues. Both BTC and global liquidity are non-stationary time series with trending changes, which may lead to errors in correlation analysis and mislead investors.

Further analysis reveals that the comparison between BTC prices and global liquidity (such as M2) can be misleading. After all, the scale difference between BTC and global liquidity is enormous, and directly comparing the two lacks mathematical basis and may mislead market expectations.

The Relationship Between BTC and Tech Stocks Has Not Strengthened as Expected

Over the past seven years, the correlation between BTC and the U.S. stock market (such as the Nasdaq) has occasionally surged but has never reached a stable high level. Even with the launch of BTC ETFs (exchange-traded funds), this correlation remains far below the 60% level reached during COVID. BTC continues to trade more according to its own rules in the market rather than as a proxy for other risk assets (such as U.S. tech stocks). Therefore, the effectiveness of overly relying on global liquidity and other macro indicators to predict BTC trends is diminishing.

Lack of Clear Catalysts, Need to Find Native Drivers of Cryptocurrency

The future trend of BTC still relies on clear market catalysts. In the absence of external drivers, the BTC market may continue to consolidate, and the rise in global liquidity is no longer a decisive factor in driving price increases. Investors interested in the crypto market should pay more attention to native driving factors of cryptocurrencies, such as changes in crypto policies, technological innovations within the industry, or supportive political leadership for cryptocurrencies, as these may have a greater impact on BTC price trends than merely relying on global liquidity indicators.

Disclaimer: The market carries risks, and investment should be cautious. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.