Why liquidity is likely to head up...and thats good for crypto

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Hey everyone,

Another exciting week in crypto.  Its easy to see the bullishness in the charts…but honestly it still feels a bit quiet when talking about crypto with people.  Good sign we’re still early.  

Usually the big bull market picks up once Bitcoin stays above its prior all time high ($69k).

In an earlier newsletter we went through how liquidity - the amount of money thats available to chase assets - is one of the key drivers of crypto asset prices.  I wanted to spend a few minutes going through why liquidity is likely to continue to rise.

Michael Howell runs CrossBorder Capital, which is an investment firm that focuses on making investments based on movements in liquidity.  His firm has put together an index for global liquidity.  Here’s a chart of it:

Whats so interesting about this chart is that it shows that there are global liquidity cycles.  The cycle runs roughly every 5 years.  And…we’re just coming off the bottom and heading up.

Liquidity up…crypto up.

Liquidity going up makes sense from here.

It makes sense because many of the largest economies are in positions to stimulate.  Here is a quick overview:

• Pro liquidity

  • China - Peoples Bank of China (PBOC) has been stimulating its economy since its in a major slow down

  • US - Federal reserve has stopped hiking rates, and fiscal spending is stimulating the economy

  • Eurozone - European Central Bank (ECB) has stopped hiking and has some interest in cutting several months from now

• Anti liquidity

  • Japan - Bank of Japan is Looking to end its negative interest rate policy

Reminder that crypto is highly volatile - there may be large pull backs along the way. But overall, the wind is at our backs.

Cheers,

Justin

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Important news and interesting content this week

• Discussion with Luke Gromen on Macro. He’s an expert on the US fiscal situation - Investors Podcast

• Conversation with PE/macro investor Dan Tapiero on his thoughts on the crypto market - Blockworks

• Bitcoin hasn’t hit its all time high when adjusted for inflation - CoinDesk

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