Renowned macro analyst Lyn Alden released a comprehensive study exploring Bitcoin's BTC/USD role as a global liquidity barometer, revealing its unique sensitivity to monetary conditions and potential as an investment tool.
What Happened: The research, conducted by Sam Callahan under Alden’s guidance, finds that Bitcoin moves in the same direction as global liquidity 83% of the time over 12-month periods – a higher correlation than any other major asset class. This strong relationship positions Bitcoin as a “liquidity barometer” that reflects changes in the global money supply and dollar strength.
Bitcoin As Liquidity Indicator
Callahan explains that Bitcoin’s purity as a liquidity indicator stems from its lack of confounding factors like earnings or dividends that influence stocks. Unlike gold or bonds, Bitcoin is still widely viewed as a risk asset at this stage of adoption, further tightening its link to liquidity conditions.
However, the study notes that Bitcoin’s correlation can break down over shorter timeframes or during periods of extreme valuation. By combining liquidity analysis with on-chain metrics like the MVRV Z-score, investors can better identify when Bitcoin may temporarily decouple from broader trends.
The research suggests Bitcoin offers a highly sensitive vehicle for expressing views on global liquidity. As Callahan states, “When Bitcoin’s sirens ring, investors would be wise to listen so that they can manage risk and position themselves appropriately to capitalize on future opportunities in the market.”
Liquidity Correlation To Stocks, Bonds, Gold
For long-term holders, understanding this liquidity relationship provides deeper insight into Bitcoin’s price drivers. Traders may find Bitcoin an attractive option for implementing macro liquidity strategies.
The study also compares Bitcoin’s liquidity correlation to other assets like stocks, bonds, and gold. While equities showed strong relationships, Bitcoin demonstrated the highest directional consistency with liquidity trends.
What’s Next: Alden’s analysis comes as investors increasingly grapple with liquidity-driven markets in the post-2008 era. By quantifying Bitcoin’s role as a liquidity gauge, the research offers a valuable framework for navigating an asset still considered enigmatic by many traditional analysts.
The influence of Bitcoin as an institutional asset class is expected to be thoroughly explored at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.
Read Next:
Image: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
