October 18, 2024
Bitcoin Set to Ride the Coming Wave of Global Liquidity
Dear Subscriber,
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| By Juan Villaverde |
The global liquidity floodgates have recently opened. And they’re likely to stay open well into 2025.
This is good news, as crypto is especially sensitive to it. In fact, to say liquidity is a catalyst for crypto is an understatement.
Liquidity is the reason why crypto moves higher or lower.
When global liquidity — the total amount of money and credit circulating in the global financial system — rises, crypto prices almost always follow suit.
This is why I often say that owning crypto is like holding a call option on central bank money printing.
On top of lifting crypto asset prices, more liquidity tends to amplify those moves — often by a factor of 10x. So if, for example, liquidity goes up 5%, crypto markets can shoot up roughly 50%.
Whenever a major shift in global liquidity occurs, a strobe light ought to start flashing somewhere in the depths of your conscious awareness.
Because you need to pay attention to what happens next.
Since around August, we’ve seen a slow ramping-up of liquidity injections by the world’s second-largest central bank: the People’s Bank of China (PBoC).
PBoC Balance Sheet Assets
The white line shows assets on the balance sheet of China’s central bank, while the blue line tracks Bitcoin’s (BTC, “A”) price.
The pink areas represent periods when the PBoC was draining liquidity. The purple areas show when they were printing money.
The correlation is striking, is it not?
- When China prints, Bitcoin goes up.
- When Bitcoin goes up, altcoins follow — and they usually outperform Bitcoin by several magnitudes.
Now, look at the right side of the chart. See how the Chinese central bank has ramped up liquidity injections in 2024?
This started around August, and that’s no coincidence.
August also marked the low point in Bitcoin’s recent correction, which began back in March …
Right around the time China started aggressively pulling liquidity from the market!
Since then, Bitcoin has shifted from a pattern of lower highs and lower lows (March to August) to higher highs and higher lows (from August forward).
This is a textbook example of liquidity in action.
Now, let’s talk about what’s been happening against this backdrop.
First, there was a lot of hype over their Golden Week holidays — which took place in early October — about the size and scope of Beijing’s planned economic stimulus packages.
The market was expecting a massive monetary boost, something akin to what Beijing enacted during the pandemic.
But when the specifics were finally revealed, the market’s reaction was underwhelming, to say the least.
But …
It’s a Big Mistake to Dismiss Beijing’s Economic Stimulus as No Big Deal
As we saw in the chart above, China has already been printing money since August. A fact neglected by some of the social media influencers.
Also, nobody rescues an economy as big as China’s from deflation overnight.
From this, we may safely conclude the money-printing that began in August — and has just gotten a big boost — has many more months to run.
With possibly even bigger boosts along the way.
And sure enough, as soon as Golden Week wound down earlier this month, Bitcoin started marching up — during Asian trading hours.
This has been another consistent pattern throughout this bull market: Bitcoin does its heavy lifting when China is awake.
In fact, we’ve even seen rallies reverse when U.S. markets open for trading.
And just last week, I warned that, “if you see Bitcoin rally above $67,000, that’s your cue that the monetary engine is firing on all cylinders again.”
Sure enough, BTC broke above that key level on Wednesday.
Bitcoin’s price action over the past three months. Source: CoinGecko.
Click here to see full-sized image.
The takeaway is clear …
A surge in demand for crypto is coming from China. And it’s having a dramatic effect on the price of Bitcoin and other leading crypto assets.
Since bottoming around $60,000 last week, Bitcoin surged to a multi-month high above $68,000. And yes, most of the heavy lifting occurred during Asian trading hours.
So, is Bitcoin ready to break into new all-time highs?
Well, we’re close.
Bitcoin may still bounce around between $60,000 and $70,000 for a time. But the pattern is unmistakable: The crypto bull market is shifting into high gear.
But not everything will go up at once. And, even in a bull market, nothing goes up in a straight line.
That’s where my Crypto Timing Model gets to shine. It flashes exact “buy” and “sell” signals so my Weiss Crypto Investor members can make the most out of the crypto market.
To learn more about my timing model — and what it is showing for the coming months — I urge you to watch my latest briefing here.
Buckle up — it’s about to get interesting.
Best,
Juan Villaverde
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